Speech by SEC Commissioner:
Remarks at the SEC Open Meeting: Shareholder Choice Regarding Proxy Materials
Commissioner Roel C. Campos
U.S. Securities and Exchange Commission
June 20, 2007
Thank you. I'm also pleased to support the new rules regarding internet availability of proxy materials, and I'd like to congratulate the Corp Fin staff and the other divisions and offices for their work. I support the idea of using technology to increase efficiency and reduce costs, while at the same time ensuring that we maintain or improve investor protection. As I mentioned last December, it is my hope that today's rules are the first steps toward a regime that modernizes shareholder voting and communications, while liberalizing the ability of shareholders to have access to the proxy process.
There have been a few negative comments about today's rules. In many respects, however, I think the comments have failed to recognize that the only significant thing today's rules require is the posting of proxy materials on the internet. That's it. Thus, these so-called mandatory or universal e-proxy rules are very modest in scope. The full-set delivery option — which is available to all issuers — is nearly identical to what is permissible under the current proxy rules, except that it requires the posting of proxy materials on an internet website. Most companies do this now anyway.
Further, even though we have not been through a full proxy season under the voluntary e-proxy rules — as many commenters have noted — the mandatory rules would apply only to large accelerated filers during this upcoming proxy season, and would be delayed until the next proxy season for all other companies. Thus, when it comes to most public companies, we will have the benefit of seeing how the e-proxy rules work over a full proxy season. And if there are unanticipated negative consequences, we will have time to modify the rules accordingly.
Finally, and most importantly, I do not believe that there are any negatives with respect to shareholders and investor protection. If the issuer chooses the notice-only option, the process is identical to what is currently required under the voluntary e-proxy model. Alternatively, if the issuer chooses the full-set delivery option, the process is almost identical to what is currently required under the paper delivery proxy rules, except that the proxy materials would have to be posted on-line. Thus, shareholders would be getting better information under the full-set delivery option than they currently receive.
I think most of the major concerns about the e-proxy rules were adequately dealt with when we adopted our voluntary e-proxy rules last December.
First, we listened to commenters and required that the Notice be sent out separately without the proxy card, and required that the proxy card and the proxy materials remain together through the same medium. As many have noted, keeping the proxy card with the rest of the proxy materials helps to improve informed voting, which is a critical aspect of our proxy rules.
Second, the rules allow shareholders who desire paper proxy materials to make a one-time permanent request for paper. Further, shareholders can make a single request for paper with respect to all securities held in a particular brokerage account.
Third, the new rules continue to contain appropriate safeguards to ensure the confidentiality of shareholders who desire to remain anonymous. To that extent, the rules explicitly state that companies and their intermediaries must maintain the websites in a manner that does not infringe on the anonymity of shareholders who visit the website.
These were three main issues raised in connection with our voluntary e-proxy rules, and as discussed, I think they were resolved in a fair and equitable manner. Nothing about the solutions to these three concerns — keeping the proxy card and materials together, allowing a permanent opt-out, and ensuring confidentiality — has changed under today's rules.
With that said, let me just ask a couple of questions. Given that we are now going to the internet and having the proxy materials posted on the internet, is it only the cost to issuers that kept us from mandating an electronic voting process? Don't we lose efficiencies by not requiring companies to make electronic voting available to shareholders? Thank you.
I thank the staff and commend you for your good work.