The petition by the U.S. Chamber of Commerce and Business Roundtable, two of the largest business trade associations, targets a rule approved last month by the Securities and Exchange Commission that would make it easier for shareholders to oust directors on corporate boards and to nominate replacements.  It also sets the stage for one of the first legal showdowns between companies and regulators over Washington's tougher approach to overseeing corporate America. Under the Dodd-Frank financial overhaul measure President Obama signed this summer, the SEC and other federal regulators are required to issue hundreds of new rules.  Supporters of the new rule say it will enable shareholders to hold boards accountable for overseeing executive pay and other decisions companies make, areas where they say boards failed lamentably in the years up to the financial crisis. Critics say large shareholders with specific ideological interests, such as labor unions and pension funds, will seek to use these new powers to press their agendas with companies.  "This special-interest-driven rule will give small groups of special-interest activist investors significant leverage over a business's activities," said David Hirschmann, a top executive with the Chamber of Commerce. "This will undermine a company's ability to grow and create jobs."  SEC spokesman John Nester said the rule is "both lawful and in the best interests of the public and shareholders. The commission will, of course, carefully consider and timely respond to the motion for a stay."  The legal challenge was filed with the U.S. Court of Appeals for the District of Columbia Circuit, which has been friendly to suits to overturn SEC rules. The case is being litigated by Eugene Scalia and Amy Goodman of Gibson, Dunn and Crutcher. Scalia is the son of Supreme Court Justice Antonin Scalia.  Before the SEC approved the rule, shareholders had few options to nominate directors to their board. Each year, companies send shareholders who cannot attend the annual meeting ballots, called proxies, that list selected nominees. The only way a shareholder could nominate directors was to send a competing ballot or attempt to get votes at the annual meeting. The difficulties of this process all but assured that the company's choices would be nominated.  The new rule gives shareholders "proxy access" - the ability to nominate directors on the ballots sent to investors. Any investor, or a group of investors, with at least 3 percent of a firm's shares for three years is allowed to nominate directors. They will be able to nominate one board member if the board has a total of seven or fewer members, or 25 percent of the total board if it is larger.  The rule applies to all public companies. Small public companies are exempt for three years.  Although the SEC had long insisted that it had the power to write this rule, it had approached the issue cautiously out of concern that it was inferring too great an authority from federal securities laws. The Dodd-Frank law confirmed the SEC's authority.  The SEC approved the rule 3 to 2, with the Republican members of the commission opposing it.  In their petition, the Chamber and Business Roundtable argue that the SEC failed to properly assess how the use of the rule by special interests could create significant costs for companies, shareholders and the economy.  The Council of Institutional Investors, a trade group representing many pension funds, said it would make a filing with the court defending the rule, which "will make companies more responsive to their shareowners," said Ann Yerger, executive director.
Trade groups representing major U.S. corporations including Alcoa, FedEx and Goldman Sachs asked a court Wednesday to scuttle a new federal regulation that would leave members of their boards of directors vulnerable to being ousted by shareholders.