A new study by staff members of the Securities and Exchange Commission concludes that no new rules are called for to make corporate directors and managers more diligent in overseeing the affairs of American companies.
The findings of the 700-page report, which took members of the corporate finance division three years to prepare, were presented formally to the commission yesterday at an open meeting.
Back in the mid-1970s, when corporate governance was a lively issue, the SEC moved to compel companies to be responsive to the public and to shareholders by adopting new rules. However, this latest report follows a more recent trend at the SEC of issuing threats instead of rules.
For example, the report notes that a survey of 1979 proxy statements filed by 1,200 corporations shows that most companies totally ignore nominees for the board of directors suggested by shareholders. Indeed, just 29 percent of the companies surveyed had committees to review board nominees, the survey found, and only three-fourths of those even considered the shareholder nominations.
The staff recommended -- in a threat to the business community -- that if their 1980 proxies don't show an improvement the commission should authorize the staff to develop a rule requiring companies to consider shareholder nominees.
The staff report found that boards of directors have become more diligent in overseeing the operations of companies by management. The staff concluded that it would be premature for the SEC to recommend or support legislation in this area.
The staff said that the use by companies of audit committees, composed of outside directors that are meant to police the company's dealings, is now widespread. But the report again threatens the business community with new rules if this trend doesn't continue.