by Thomas Stratmann, J.W. Verret
January 19, 2012
Working Paper Series
The unexpected application of the 2010 proxy access rule to small firms caused approximately $335 million in losses to the value of shares in small firms. Subsequent to the events of this study, the D.C. Circuit overturned the 2010 proxy access rule on the grounds that it did not contain sufficient economic analysis demonstrating that the costs of the rule exceeded its benefits.12 The SEC has indicated its intention to revisit the rule in the future. This study offers evidence that proxy access may be harmful to publicly traded companies. In particular, this study demonstrates that proxy access is harmful to smaller companies. It also indicates that regulators should remain cautious in writing new rules to affect the balance of power between shareholders and boards of directors, as the potential for unintended consequences and the costs of those consequences could be significant.