Several years ago the SEC proposed a new rule (14a-11), which would have allowed shareholders to put nominees for the board of directors on the company's proxy statement. I opposed that proposal for the reasons set out in my article A Comment on the SEC Shareholder Access Proposal. Wisely, the SEC deicded to let the rule quietly die rather than adopt it.
A bunch of insitutional investors have decided to try using the SEC shareholder proposal rule (14a-8) to end run the SEC's inaction. Under that rule, shareholders can put certain types of proposals on the agenda for a shareholder meeting. Some institutions (mostly public sector unions, which may tell you something) are trying to use shareholder proposals to impose a nomination process on the company and majority vote for directors via bylaw amendments.
A court case involving AFSCME ordered the SEC to let shareholders use the proposal rule in this way. In response, the SEC announced it would consider revising the proxy rules. Recently, however, the SEC announced that regulatory action would delayed at least until December:
"It was a can of worms then. It's a can of worms now. It was very divisive last time. They didn't reach a consensus," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. (Link)
Charles may be right about the SEC Commissioners' inability to reach consensus, but as a policy matter the issue really is pretty simple.
As I detail in The Short Life and Resurrection of SEC Rule 19c-4, the DC Circuit's seminal decision in Business Roundtable v SEC, the federal proxy rules were not intended to deal with the substantive aspects of shareholder voting rights. The federal proxy rules are properly concerned only with the need for full disclosure and fair solicitation procedures.
It is state corporation law that decides the rule of the game by which directors are elected. It is precisely for this reason that the exclusion of matters relating to election of directors created by Rule 14a-8(i)(8) needs to get an expansive interpretation. The logic of the Business Roundtable case is that deciding what issues are the proper subject of shareholder action is a matter of state law (which is also the logical interpretation of SEC Rule 14a-8(i)(1)'s exclusion of matters that are not a proper subject of shareholder action).