Hewing to the Obama administration’s penchant for heaping a lot on it’s plate, Securities and Exchange Commission Chairman Mary Schapiro outlined an ambitious regulatory agenda that will depart in major ways from the one advanced by her successor. And it could have a large impact on the process by which boards are elected.
During an address to a conference hosted by the Council of Institutional Investors, Shapiro emphasized the need for regulatory reform. “Standards deteriorated and financial activity moved away from regulated and transparent markets and institutions, into ’shadow markets.’ Regulatory and enforcement resources, most notably at the SEC, declined,” she said.
Among the many proposals the SEC is considering are a few that could have a profound impact on the process by which directors are chosen and elected and possible new disclosures about the qualifications of directors. Schapiro said that in June the Commission will consider whether to enhance disclosure around director nominee experience, qualifications, and skills. “The current rules only require a very brief description of a candidate’s business experience over the past five years,” she said. ”That may not be sufficient in today’s complex business environment. I want to make sure that shareholders have the information needed to make sound proxy voting decisions.”
Also on the table could be new disclosures around corporate governance. Schapiro said that the commission is considering new disclosure requirements that would force boards to provide more detail about their governance structure. “We’ll also be considering whether boards should disclose to shareholders their reasons for choosing their particular leadership structure — whether that structure includes an independent chair, a non-independent chair, or a combined CEO/chair,” she said.
Also on the disclosure front, Schapiro said the Commission will revisit compensation disclosure to assess its effectiveness and will look at what disclosures should be required on risk assessment.
“I have asked our staff to develop a proposal for Commission consideration that looks to providing investors, and the market, with better insight into how each company and each board addresses these vital tasks, said Schapiro.
Perhaps the the biggest issue that the SEC will take on, and one that is bound to be controversial, is proxy access. “Next month, the Commission will consider a proposal to ensure that a company’s owners have a meaningful opportunity to nominate directors, said Schapiro. ”We are looking at what the Commission considered in both 2003 and 2007; and we’re also considering the potential impact of proposed changes to Delaware’s corporate law.”
The details on these agenda items will be coming forth in the next weeks and months. Just how much of it the SEC can move forward remains to be seen. But the fact that changes to some vital board processes will be made is undeniable.