Schapiro Recommends New Proxy Vote Regulations

(RTTNews) - A top official in the Obama Administration said Wednesday that regulation of proxy voting processes by the Securities and Exchange Commission must be enhanced.

Speaking before the start of an open SEC meeting, SEC Chairman Mary Schapiro stressed the importance of improving proxy disclosure and solicitations.

"Proxy statements are among the most significant communications between a company and its owners, and they also are central to the only process through which owners formally and regularly participate in the governance of the corporation," she said in a prepared statement.

Proxy voting is the process by which a member of a voting body can give power to another member of the body to vote for him in his absence.

Schapiro said that current market turmoil emphasizes the importance of activities that contribute to a company's risk profile being fully disclosed to investors who may use the proxy process to vote on important company decisions.

The chairman then went on to highlight proposals for changes that would improve four specific aspects of proxy disclosure.

Schapiro called for better disclosure about relationships between companies' compensation policies and their risk profiles, as well as "compensation consultant conflicts of interest."

She also spoke about improvements in information about director and nominee qualifications so that principals have complete information when using proxy voting to elect a board member.

"Specifically, we are looking for better disclosure about each candidate's particular experience, qualifications, attributes or skills that qualify that person to be a board member," she said.

Better disclosure was also an important aspect of the final two issues discussed by Schapiro. The chairman called for better disclosure about a board's risk management role and its reasons for choosing its leadership structure, in addition to timely disclosures of annual meeting voting results.

"I have heard from both investors and companies a shared concern that our proxy statements are in danger of becoming unreadable, because there is so much information packed into them," she said. "I hope that all will focus on whether the right information is being disclosed in the right way, not just adding to an already weighty document."

Schapiro also commented on a rule change proposed by the New York Stock Exchange that would prohibit brokers who hold shares in a street name from voting on behalf of their customers in director elections without receiving specific instructions from their customers.

"The NYSE's proposal is designed to help assure that voting rights for matters as critical as the election of directors are exercised by those with an economic interest in the company, rather than by brokers," she said.

The SEC voted 5-0 to propose the rule changes and proxy vote improvements.

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