SEC Proposes Disclosure Requirements Related to Director Nominations and Shareholder Communications


Washington, D.C., Aug. 6, 2003 — At an open meeting today the Securities and Exchange Commission voted to propose rule changes that would strengthen disclosure requirements relating to nomination of directors and shareholder communications with directors. The proposals follow the recommendations made by the Division of Corporation Finance to the Commission in its July 15 "Staff Report: Review of the Proxy Process Regarding the Nomination and Election of Directors." The Staff Report is available on the Commission's Web site at

Chairman William Donaldson said, "These rules are an important first step in improving the proxy process as it relates to the nomination and election of directors. The Commission believes that better information about the way board nominees are identified, evaluated and selected is critical for shareholder understanding of the proxy process regarding nomination and election of directors. We also believe that better information about the processes of shareholder communications with boards lies at the foundation of shareholder understanding of how they can interact with directors and director processes. We intend to continue our work in improving the proxy process by considering later this fall additional important proposals regarding enhanced shareholder access to the proxy process for nomination of directors. These are vital issues in strengthening the proxy process for the benefit of shareholders."

These disclosure proposals represent the first step in the implementation of the recommendations in the Staff Report. The Commission anticipates considering further rule proposals later this fall regarding enhanced shareholder access to companies' proxy statements and forms of proxy for nomination of directors. The Staff Report also discusses possible access proposals.

Today's proposals would call for important additional information regarding a company's process of nominating directors, including:

  • whether a company has a separate nominating committee and, if not, the reasons why it does not and who determines nominees for director;
  • whether members of the nominating committee satisfy independence requirements;
  • a company's process for identifying and evaluating candidates to be nominated as directors;
  • whether a company pays any third party a fee to assist in the process or identifying and evaluating candidates;
  • minimum qualifications and standards that a company seeks for director nominees;
  • whether a company considers candidates for director nominees put forward by shareholders and, if so, its process for considering such candidates; and
  • whether a company has rejected candidates put forward by large long-term institutional shareholders or groups of shareholders.

Today's proposals also would call for important new information regarding shareholder communications with directors, including:

  • whether a company has a process for communications by shareholders to directors and, if not, the reasons why it does not;
  • the procedures for communications by shareholders with directors;
  • whether such communications are screened and, if so, by what process; and
  • whether material actions have been taken as a result of shareholder communications in the last fiscal year.

These proposals would also apply to proxy statements of registered investment companies in the same manner that they apply to other companies.

Today's proposals are expected to be available on the Commission's Web site within the next few days. The Commission is soliciting comment on today's proposals for a 30-day period following their publication in the Federal Register.

Last modified: 8/6/2003