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WASHINGTON (Reuters)—U.S. regulators Monday put on hold their rule giving shareholders more power to influence corporate boards, a win for business groups trying to overturn the rule.
The U.S. Chamber of Commerce and Business Roundtable sued the U.S. Securities and Exchange Commission last week and said that the SEC's recently adopted rule was arbitrary and capricious.
In filing the lawsuit, the groups asked the SEC to delay implementation pending the outcome of the legal challenge.
The SEC said a stay "avoids potentially unnecessary costs, regulatory uncertainty, and disruption that could occur if the rules were to become effective during" the court challenge.
The Chamber of Commerce does not expect the U.S. Court of Appeals for the District of Columbia Circuit to make a decision until early next year.
That means shareholders most likely will not have time to put forth proposals in time for the 2011 proxy season in the spring when many publicly traded companies hold their annual meetings.
"We are happy the SEC granted our request for a stay," said Tom Quaadman, an executive director with the Chamber of Commerce.
The SEC's so-called proxy access rule lets shareholders nominate directors if they hold at least 3% of the company's stock for at least three years.
The SEC and the business groups are asking the court to expedite its review. The SEC said questions about its rules "will be resolved as quickly as possible."
The rule was slated to go into effect mid-November so shareholders could make proposals in time for spring 2011.
Institutional investors oppose the lawsuit and have called it an assault on a fundamental shareholder right.
The case is Business Roundtable et al. vs. SEC, No. 10-1305, D.C. Circuit Court of Appeals.