In an April 6 speech at the “Council of Institutional Investors – Spring 2009 Meeting”, Mary Schapiro, Chairman of the Securities and Exchange Commission, previewed a number of regulatory reform initiatives that the SEC will consider in upcoming months.
In May, the staff will consider a proposal regarding shareholder access to proxies with a view to ensuring that “a company’s owners have a meaningful opportunity to nominate directors”, according to Schapiro. Chairman Schapiro had previously directed the SEC’s staff to draft proposals permitting shareholder access to issuers’ proxy statements, as described in the March 20, 2009, edition of Corporate and Financial Weekly Digest. Schapiro indicated that the SEC would also review the staff’s 2003 and 2007 proposals, as well as the potential impact of proposed changes to Delaware law, regarding proxy access (applicable changes in Delaware law are described in the March 20, 2009, edition of Corporate and Financial Weekly Digest). According to Chairman Schapiro, the SEC is reviewing the issue of shareholder access to proxies with “fresh eyes” and a view to ensuring that “any procedural requirements for access are rational, and not a means to thwart effective investor participation”.
In June, the SEC will consider whether to “enhance” disclosure regarding director nominees’ experience, qualifications and skills. Schapiro believes that the current rules, which require a brief disclosure of a candidate’s business experience over the past five years, may be inadequate to enable shareholders to make informed voting decisions. Schapiro indicated that the SEC would also consider whether to require disclosure of the reasons for an issuer’s choosing a particular leadership structure, such as an independent chairman of the board, a non-independent chairman or a combined CEO/Chairman.
Chairman Schapiro also suggested that the SEC would review existing compensation disclosure requirements and consider whether greater disclosure regarding companies’ risk management policies (including in the context of setting compensation) may be necessary. In that regard, Chairman Schapiro noted her intention to “make sure shareholders fully understand how compensation structures and practices drive an executive’s risk taking”. Schapiro has asked the SEC’s staff to develop a proposal to provide investors, and the market, with better insight into how companies and their boards address risk management. She also indicated that the SEC will consider whether greater disclosure should be required regarding a company’s overall compensation approach, beyond decisions with respect to the highest paid officers, and whether compensation consultant conflicts of interests should be disclosed.