GM Sets New Rules for Shareholder-Nominated Directors

A change to General Motors Co. bylaws enables its shareholders or groups of investors to directly nominate board members—if they have held at least 3% of GM’s shares for at least three years. The measure took effect on March 4, according to a regulatory filing.

The proxy access rule enables large long-term investors to make nominations without the expense of soliciting votes from other shareholders. Groups that meet the new standard may nominate as many as two people or 20% of the board, whichever is greater.

Reuters says the rule would have presented a barrier to proxy access by a group of hedge funds that last year sought to install activist investor Harry Wilson on the GM board. The group owned about 2% of GM at the time.

Wilson, who served on the federal team that restructured Chrysler and GM out of bankruptcy in 2009, demanded that GM enhance shareholder value by spending $8 billion of its $25 billion in cash to buy back shares.

GM avoided a proxy fight by agreeing to return $5 billion to shareholders. The company said it intended to maintain a $20 billion cash reserve to defend its investment-grade status.