Robert A.G. Monks, a shareholder activist and corporate governance advisor, disagrees, saying there is misplaced concern about the shareholder proxy statement, which he finds to be a “diluted” shareholder resolution procedure. “The dialogue has been going in the wrong direction. The real issue is the capacity for shareholders to make directors accountable. That’s the law of every country in the world except the United States.”
Yet Monks also felt Schapiro’s real test will be the future of the SEC as an independent entity. “So much of Mary Schapiro’s energy is devoted to whether the SEC survives,” Monks says, describing the current chairman as a “very engaging person. She listens to people. She has to deal with the cards she has been dealt.”
Meredith Cross, director of the Division of Corporation Finance, whom Schapiro recruited back to the agency in July, says the SEC’s mission is on target: “We are a disclosure-based agency. We get information to shareholders so they can make their own judgment on their company’s leadership.” Cross, who rejoined the SEC from the Washington, D.C., office of WilmerHale, previously served at the SEC for several years in the 1990s, including holding the position of deputy director in the Division of Corporation Finance, where she was known for playing key roles in disclosure-related rulemaking and plain-English initiatives for investors.
“We view the new rules, which were proposed in July 2009, approved by the Commission in December 2009, and will be effective for the 2010 proxy season, as a successful initiative to improve disclosure in proxy statements, including disclosure of the board’s role in risk oversight,” she says. Unlike other rulemaking efforts, this one practically zipped through governmental red tape.
“There was a lot of commitment to get it done: Helpful comments from shareholders, the companies and the law firms which advise the companies. These comments helped us tailor the rules more precisely to elicit the disclosure we were looking for. While we moved quickly, I believe we did a responsible job and this is a very good rulemaking that is right in the Commission’s sweet spot,” Cross told NACD Directorship.
An ‘Exciting Sense of Purpose’
The Commission was founded by President Franklin Delano Roosevelt in 1933 following the stock market crash of 1929 as part of the New Deal agenda to protect investors wearied by the Great Depression. Fast forward to our own near-Depression in 2009: How does the SEC under Schapiro plan to influence public boards of directors in the aftermath of the Great Recession? Speaking for the Commission, Cross says,” The new rules should encourage companies to communicate better with their shareholders about key points, such as why the board has chosen its particular leadership structure and why the board is recommending the particular persons as nominees to the board.”
So what can board directors expect from the SEC? Cross points to several areas in which boards can expect to see some action from the SEC in the early part of 2010:
- Proxy access: After the SEC received more than 500 comment letters in response to its proposing release, the comment period was reopened for 30 days with respect to additional data and related analyses included in the comment file.
- E-proxy: “We’re working on finalizing an amendment to allow issuers to include information to make the notice that is sent to investors more user-friendly for retail investors,” Cross says.
- Proxy plumbing/proxy mechanics: The staff is conducting a comprehensive review of the mechanics by which proxies are voted and the way in which information to shareholders is conveyed. “This goes beyond disclosure in the proxy materials—we’re also looking at the entire process through which proxies are distributed and votes are tabulated,” Cross says.
Cross described the agency’s current culture as “invigorated. There is an exciting sense of purpose. We have important work to do and our people want to get that work done.” This sense of energy resonates outside the agency as well. “The agency and their staff have a spring in their step. They feel they’re back,” says Roel Campos, the partner in charge of Cooley Godward Kronish’s Washington offi ce and a former SEC commissioner who served as the agency’s liaison to the international regulatory community.
I look forward to receiving a copy of the article
I believe the SEC should look into controlling the practice of “Naked Short Selling.” While there has been a lot of conversation we need some action.