The White House intervened to weaken a provision in the final financial regulation bill that aims to give shareholders more say on how companies are governed, three people familiar with matter say.
A select group of lawmakers are merging the Senate's reform bill with the House of Representatives' version.
Both bills affirm the Securities and Exchange Commission's authority to adopt so-called "proxy access" rules, which would give shareholders an easier and cheaper way to nominate corporate board directors.
But the White House pushed Senate negotiators to modify the measure and only allow shareholders owning at least 5 percent of a company for more than two years to nominate a corporate board director, according to a congressional aide and two industry sources.
The SEC has already proposed setting the threshold at a sliding scale between 1 percent and 5 percent, with the lowest threshold for larger companies. Shareholders would have to own stakes for at least a year.
The Senate measure, which was agreed upon by the majority of Senate negotiators, would effectively kill the SEC's proposal. Representatives must agree with the Senate provision in order for it to be included in the final bill.
Senator Christopher Dodd, who shepherded the financial regulation bill through the Senate, said the White House did not intervene.
Dodd told reporters that he believed the measure was needed to get the final bill adopted. "There are various people who have strong feelings about various aspects of the bill," Dodd said.
The Obama administration said "proxy access" was not part of its original financial reform proposals.
"We have not taken a position explicitly. We have heard from and understand the various concerns on this critical corporate governance issue from multiple stakeholders including business, investors, labor and others," an administration official told Reuters on Thursday.
"We are confident that the House and Senate conferees will come to a resolution and deliver a consensus view."
The Senate's proposal has enraged institutional investors who have been fighting for proxy access for years. Although shareholders can nominate directors, they can only do so by waging a proxy fight, which many contend is costly and burdensome.
The Council of Institutional Investors, which represents public, union and corporate pension funds with more than $3 trillion in assets, urged its members to call and email White House adviser Valerie Jarrett to express concerns.
The Council has also sent a letter to House negotiators urging them to reject the Senate measure.
"A 5 percent ownership requirement would effectively shut out those large, long-term, responsible investors — largely public and union pension funds — most willing to engage companies and hold them accountable," the group said in a letter to House negotiators.
Democratic Representative Barney Frank, who is leading negotiations to merge the bills, has said there is "real angst" over the Senate's proposal. Corporate governance issues were not expected to divide House and Senate Democrats.
But Frank and his fellow Democrats appeared unlikely to accept the Senate's language.
"Five percent is a lot to have to own in a company," Frank told reporters after Democratic senators proposed the threshold on Wednesday. "The Senate proposes to restrict the SEC significantly."
© 2024 Thomson/Reuters. All rights reserved.