Recently, Securities and Exchange Commission Chairman Mary Schapiro addressed the Spring 2009 meeting of the Council of Institutional Investors. Chairman Schapiro used the opportunity to discuss the Commission's regulatory agenda and her thoughts on a number of initiatives designed to enhance disclosure and corporate governance practices. Chairman Schapiro emphasized that the Commission's disclosure regime "is generally working well" but noted that there is room for improvement. In her address, Chairman Schapiro described the following disclosure and corporate governance initiatives that are expected to be considered by the Commission:
- In May, the Commission will consider a new proposal to "ensure that a company's owners have a meaningful opportunity to nominate directors." As part of its process, the Commission is reviewing its 2003 and 2007 proposed rules designed to enhance shareholder proxy access by allowing 5 percent shareholders to nominate a director candidate using the company's proxy card, instead of bearing the time and cost associated with a separate proxy solicitation.
- In June, the Commission will consider whether to propose rules that would require enhanced disclosure of the business experience, qualification and skills of director nominees. Currently, Item 401 of Regulation S-K only requires a brief description of the nominee's business experience over the past five years. Chairman Schapiro stated that she wants to make sure shareholders have the information necessary to make a sound voting decision, and that the current requirement "may not be sufficient in today's business environment."
- The Commission will consider whether the board of directors should be required to disclose its reasoning for choosing to have an independent chairman, a chairman who is not independent or a chairman who is also the company's chief executive officer.
- Noting that "compensation drives behavior," Chairman Schapiro announced that the Commission will consider whether its compensation disclosure rules are designed to elicit sufficient information about how a company's compensation structure encourages executive risk-taking. Specifically, the Commission will consider whether it should require disclosure about how a company and its board manage risk, both generally and in the context of setting compensation.
- The Commission will also consider whether to revise its current executive compensation disclosure rules to require companies to discuss their company-wide compensation philosophy for all employees and any conflicts of interest arising out of management's and the board's use of compensation consultants.
Chairman Schapiro also discussed other matters on the Commission's agenda, including new rules limiting short sales; increased regulation of hedge funds, broker-dealers and investment advisors; increased disclosure requirements for credit rating agencies; oversight of the credit default swap market; enhancing standards applicable to money market funds; and increasing the disclosure required by municipal bond issuers.