U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Statement at SEC Open Meeting on Providing Disclosure About Risk, Compensation and Corporate Governance Matters


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

Washington, D.C.
December 16, 2009

This is an open meeting of the U.S. Securities & Exchange Commission on December 16, 2009. Today, we will consider two recommendations.

First, we will consider whether to adopt rules that would help investors make more informed voting decisions.

And, second we will consider whether to adopt rules designed to better protect those investors who entrust their assets to investment advisers. Such rules would apply additional safeguards where the safeguards are needed most — that is, where the risk of fraud is heightened by the degree of control the adviser has over the client’s assets.

Proxy Enhancements

But first, the Commission will consider adopting revisions to our proxy disclosure rules so that investors have better and more relevant information when making their voting decisions. By adopting these rules, we will improve the disclosure around risk, compensation, and corporate governance, thereby increasing accountability and directly benefiting investors.

Through these rules . . . .

  • Investors will better understand whether a company’s compensation policies and practices are reasonably likely to increase the company’s risk exposure.
  • Investors will better understand the value of stock and option awards granted to company executives and directors.
  • Investors will better understand the background and qualifications of directors and board nominees.
  • Investors will better understand how diversity, defined as broadly or narrowly as the company may choose, is considered by the board when nominating director candidates.
  • Investors will better understand why a board has chosen its particular leadership structure, and what the board’s role is in the area of risk oversight.
  • Lastly, investors will better understand whether the compensation consultant retained by the board’s compensation consultant performs other work for the company that could create at least the perception of a conflict of interest or worse.

These revisions further advance what I strongly believe is a critical factor in “corporate governance.” “Good” corporate governance is a system in which those who manage a company — that is, officers and directors — are effectively held accountable for their decisions and performance. But accountability is impossible without transparency.

After all, shareholders are the owners of our publicly traded companies. Yet, owners cannot responsibly exercise their oversight without good information about the issues that drive voting decisions.

The Commission’s role in this effort is to listen to shareholders to make sure that we understand what information they need. And, because investors are not all of like mind, we must also make reasonable and balanced judgments to ensure that our rules require disclosure that makes sense.

I am very pleased to support these amendments because I believe that they meet these goals. I am also grateful for the many thoughtful comments that were provided by investors, companies, and others involved in the proxy process. As always, these final rules are better because of the input provided by commenters.

Even with these new rules, we still have much work to do to improve the ability of shareholders to effectively exercise the oversight responsibility that is an integral component of their proxy vote. Our staff continues to work on the project through which we will comprehensively review the infrastructure that supports the proxy process — from ensuring the integrity of voting results to reviewing the role of proxy advisors.

We are also continuing to consider comments on the Commission’s proposal to facilitate the state law rights of shareholders to nominate directors. As I have stated previously, I remain committed to bringing final rules in this area to the full Commission for consideration early next year.

I would like to thank the staff of the Division of Corporation Finance for their work on this matter, specifically Meredith Cross, Paula Dubberly, Felicia Kung, Sean Harrison, Anne Krauskopf, and Steve Jacobs. I would also like to thank their colleagues in the Office of the General Counsel, specifically David Fredrickson and Bobby Carter; from the Division of Risk, Strategy and Financial Innovation, thank you to Josh White, Scott Bauguess and Don Monk; and from the Division of Investment Management, thank you to Mark Uyeda and Albert Zapata. Finally, I would like to thank the other Commissioners and all of our counsels for their work and comments.

Now I’ll turn the meeting over to Meredith Cross, Director of the Division of Corporation Finance, to hear more about the Division’s recommendation.



Modified: 12/16/2009