SEC seeks transparency over director nomination
The election of corporate directors should have improved disclosure and improved shareholder access to the nomination process, according to a report published by the SEC's division of corporation finance.
Under the SEC proposals, the nomination committee of public companies ought to more fully disclose their practices, while candidates recommended by shareholders should also be considered. Communications between shareholders and company directors is another area requiring more transparency.
The SEC also suggests that large, or long-term shareholders, should have the ability to nominate directors where there is large-scale shareholder dissatisfaction over the proxy process at the company.
William Donaldson, SEC chairman, comments: "An effective proxy process has never been more important to restoring investor confidence." And Donaldson reinforced hopes that the recommendations will be enacted sooner, rather than later. "I hope that the Commission will be able to consider such proposals as early as August with regard to the disclosure recommendations and as early as September with regard to the proxy access recommendation," he adds.
The report was published in response to a request by the American federation of state, county and municipal employees pension plan to enhance the powers of large shareholders at public companies. The report examines the previous SEC actions on this issue and discusses alternative methods for increasing shareholder participation in the proxy process.