Investors Ramp Up Fight for Ballot Choice

According to Ryan, allowing shareholder to directly nominate directors would serve special interests rather than those of ordinary shareholders, and would ultimately result in fractured and dysfunctional boards.

Moreover, Ryan says that the spate of corporate governance reforms enacted during the past six years, on issues from disclosure about executive compensation to independent directors, make proxy access unnecessary.

"A lot of the things that created the basis for arguing why shareholders should have greater access have been addressed in a different manner," says Ryan.

Change to Win

Yet some shareholders see plenty of continuing examples of poor governance and oversight.

One group, a coalition of pension funds dubbed Change to Win Investment Group, blames directors at Bank of America(BAC Quote), Citigroup(C Quote), Merrill Lynch(MER Quote) and other firms for failing to review the financial risks or adequately assess the steps that management was taking to control exposure during the subprime crisis.

Among the directors on the six-member committee responsible for assessing credit concentration at Bank of America, for example, Change to Win contends that two did not qualify as independent under New York Stock Exchange guidelines, while the committee chair's board seats at five other publicly listed companies suggests that she was overextended.

According to the Change to Win, the six banks at issue wiped out more than $254 billion in shareholder value between Jan. 31, 3007 and Jan. 31, 2008.

Some shareholders also cite the epidemic of stock option backdating that came to light in 2006 and led to hundreds of millions of dollars in restatements at companies including Apple(AAPL Quote), Marvell Technology(MRVL Quote) and KLA-Tencor(KLAC Quote), as other examples in which directors were either unable or unwilling to police accounting shenanigans.

"The way you're going to resolve problems of non-performance-based CEO pay, the way you're going to deal with the outside risks taken by many of the investment banks in the subprime mortgage mess, all relate to making boards more accountable," says Rich Ferlauto, director of pension and benefit policy at the American Federation of State, County and Municipal Employees.

"The only real way you can do that is by giving institutional investors the ability to elect directors in a contest that's fair," he says.

While Ferlauto isn't holding out much hope for a policy change with the current SEC, even if it does reconsider its November regulation on proxy access, he believes the goal of proxy access is attainable within a year or two.

"The sense is we're at an end game and we're going to see proxy access," he says, noting that institutional investors have become much better at flexing their muscles by building bigger positions in companies and coordinating strategies among themselves to pursue key reforms.

If the Democrats win the general election and retain control of Congress, McGurn of RiskMetrics foresees a shareholder rights bill, including proxy access, within the first 100 days of a new administration.

It's impossible to predict how the political winds will ultimately blow, but some shareholders can already smell change in the air.