HealthSouth has become the first major US corporation to take advantage of a recent change in Delaware law which allows companies, by by-law, to reimburse shareholders for expenses incurred in board elections. Many shareholder activists have noted that access to a ballot, without reimbursement, is a barrier to entry for shareholders wishing to influence board composition. The Delaware law enables reimbursement, something that the SEC's proxy access proposals currently do not.
Weinberg Center Director Professor Charles Elson, who as Chairman of the HealthSouth governance and nominating committee spearheaded the amendments, noted "I am pleased to see the playing field being leveled for all shareholders. Today's action is a significant one for HealthSouth. More generally, I expect this to be the first in a series of corporate actions to take advantage of this pro-shareholder Delaware law. I have maintained that access, without reasonable reimbursement, provides shareholders with an empty right--the cost of proxy contests can be the real issue in shareholder empowerment."
Please see this story for more details. While the SEC has officially stated it has postponed its vote on its proxy access proposals until after this proxy season, public remarks from the Chairman and other Commissioners indicate a Commission vote will be held. To some observers, it appears that the SEC believes it has a mandate from Congress to adopt proxy access reform on a federal level. A very real question may become will federal action be necessary if the HealthSouth vote is the first domino to fall?
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