The June 28 editorial on the Securities and Exchange Commission's proposed rule regarding shareholders, "Mr. Donaldson's Next Move," did not acknowledge the substantial progress made by public corporations in improving board independence as well as shareholder communication.
There has been more reform in U.S. corporate governance practices in the past 24 months than in the past 50 years because of leadership by SEC Chairman William H. Donaldson, the commission, the stock exchanges and Congress. Backed by strong support from Business Roundtable CEOs, the SEC has improved the transparency of the board election process and enhanced communications between boards and shareholders.
In addition, Business Roundtable companies have moved aggressively toward greater board independence and oversight, more transparency, and increased communication with shareholders. A recent survey shows that four out of five Business Roundtable companies report that at least 80 percent of their boards are independent. This surpasses the New York Stock Exchange's listing requirements, which call for only a simple majority of the board to be made up of independent directors.
Further, the survey showed that 87 percent of companies have established a procedure for shareholder communications with directors, and companies continue to improve procedures for nominating directors, with 86 percent having established qualifications or criteria for directors.
The editorial also overlooked the fact that board members are chosen by independent nominating committees, so the days of CEO-backed candidates that the editorial referred to are long gone.
With regard to the shareholder rule now before the SEC, the chief executives of the Business Roundtable agree that it is important for shareholders to have a voice. But we do not believe that 35 percent of shareholders should have the power to thwart the majority.
That is why we need to assess the effect of the tremendous progress already made before more new rules and regulations are added.
JOHN J. CASTELLANI