The Second Circuit issued a decision yesterday in American Federation of State, County & Municipal Employees, Employees Pension Plan v. American International Group, Inc. that re-energized the debate from 2003 over ballot access issues. The decision stems from a shareholder proposal filed by AFSCME with AIG seeking a change to AIG's bylaws that would provide for shareholder ballot access. The SEC's Division of Corporation Finance had granted AIG's no action request. AFSCME sought an injunction, but the district court held that the proposal was excludable from AIG's proxy statement because it related to elections. The AFSCME then appealed to the Second Circuit.
Ballot access issues have been extremely contentious for the past few years. In 2003, the SEC had proposed to give shareholders access to ballots. Issuers were vigorously opposed this proposal and raised a number of objections. See the Business Roundtable’s 87-page comment letter here. The SEC did end up adopting disclosure rules relating to the nomination process, but the ballot access proposal never went beyond the proposed rule stage.
The Second Circuit's decision provides a back door way for shareholders to accomplish what the SEC did not do through rulemaking in 2003. Shareholder groups were upset that the SEC did not move forward with the ballot access proposal, but this decision allows shareholder groups to force a vote on whether to amend corporate bylaws in a way that, at least with respect to individual issuers, would provide ballot access.