This morning's open meeting on proxy access at the SEC was exciting. It was a packed house full of reporters and industry professionals. I know Gordon has a post on the way with more details, but I just wanted to discuss what in my view was the most significant development from today's hearing.

Brian Breheny, Deputy Director of the Division of Corporation Finance, introduced the Division's recommendation (which is in reality the Chairman's recommendation). After an extensive elaboration of the direct access rule, he also noted a bylaw proposal element of the rule as follows: "shareholders could require companies, under certain circumstances, to include proposals in their proxy materials that would amend, or request an amendment to, the company's governing documents to address the company's nomination procedures or other director nomination disclosure provisions that do not conflict with the Commission's rules."

The last sentence is operative here, the access-via-bylaw element is subordinated to the direct access element of this proposal. This rule will effectively limit shareholders' ability to design their own access bylaws. Delegations from a certain state (that has been known to incorporate a few companies) and industry groups met with the Chairman leading up to this proposal, and it was understood that the two proposals would be separate and that, therefore, there would be time to consider which route was appropriate. As it turns out, this is not the case. The Chairman is certainly an astute political operator, but then again I suppose that's how you get to be Chairman.