On February 18, Securities and Exchange Commissioner Elisse B. Walter addressed the Master Class on Corporate Governance at the Practising Law Institute New York Center. The class focused on the role of corporate governance in restoring investor trust. Commissioner Walter expressed her view that the Commission should move forward with actions to enhance shareholder participation and promote greater board accountability in five areas:
- proxy access,
- upgrading disclosures to shareholders on director nominees,
- harnessing technology to improve shareholder access to company information,
- acting on proposed NYSE amendments to eliminate uninstructed broker votes in director elections, and
- adopting rules instituting “Say-on-Pay” for shareholders of all public companies.
Commissioner Walter acknowledged the conflicting views that led to the stalemate on proxy access in 2007, and expressed her strong belief that shareholders should “have a real say in determining who will oversee the management of the companies that they own.” In particular, she advocated lessening disclosure requirements for shareholders seeking proxy access (which would exceed those required in proxy contests), substantially scaling back the 5% ownership threshold in prior proposals, but considering a tiered approach in the case of smaller public companies. Commissioner Walter called for the inclusion of additional information in proxy statements, beyond a mere recitation of a director nominee’s prior jobs and educational background, to help investors make more informed voting decisions.
Commissioner Walter suggested the SEC enhance shareholder participation through the use of technology and the elimination of uninstructed broker votes in director elections. Despite the significant drop in shareholder participation in 2007 when the SEC attempted to improve the proxy process via e-Proxy, Commissioner Walter encouraged information gathering through the Internet and electronic communications, and suggested that improvements be made to fix the e-Proxy process. With respect to broker votes, Commissioner Walter recommended that the SEC push forward in determining whether to adopt the NYSE’s proposed amendments to Rule 452, which would eliminate uninstructed broker votes from director elections.
As a final note, Commissioner Walter encouraged directors and managementsto take the burden upon themselves to improve accountability by setting a“tone at the top” honoring the responsibilities that arise from the trust placed in them by investors. In this regard, Commissioner Walter recommended thatcompanies allow “Say-on-Pay” on their ballots as a measure to restore investortrust and increase accountability of board members and corporatemanagement. She also noted that the American Recovery and ReinvestmentAct signed by President Obama on February 17 requires Troubled Asset ReliefProgram recipients to permit a non-binding, “Say-on-Pay”vote in their proxy materials and also requires the SEC to issue final rules and regulations withinthe next year. See also “New Guidance on ‘Say-on-Pay’Voting and CEO/CFO Certification Requirements for TARP Recipients” above.