The Securities and Exchange Commission yesterday authorized a broad reexamination of its proxy rules in an effort to determine whether changes would increase shareholder participation in corporate affairs and improve management accountability.
In a separate action, the commission proposed amendments to its disclosure requirements both to provide investors with some additional financial information about registered companies and to bring some of its disclosure provisions into line with data required under standards adopted by the Financial Accounting Standards Board.
Although the proxy announcement offered no specific proposals, SEC officials said the commission is concerned about cases of "entrenched management misconduct" that have surfaced in recent years, particularly with regard to questionable payments.
Barbara L. Leventhal, special counsel to the director of the SEC's division of corporation finance, said the agency's proxy rules have not been reconsidered on a broad basis since they were originally adopted between 1934 and 1942, although there have been some amendments over the years.
The commission's statement acknowledged that questions have been raised about the extent to which shareholders are able to participate meaningfully in the affairs of the modern public corportion. "These questions are based on a recognition that, in many public coporations, management, in part because of its access to the proxy machinery, is able to exercise control over the election of directors and thereby, in effect, be in a position to set corporate policy and to avoid effective oversight," the agency said.
Leventhal said the study would weight the possibility of giving shareholders access to management's proxy materials, requiring additional disclosures about director nominees and the process used to select them.