Speech by SEC Commissioner:
Statement at SEC Open Meeting
Commissioner Luis A. Aguilar
U.S. Securities and Exchange Commission
July 1, 2009
Good morning everyone.
I, too, would like to welcome Meredith Cross in her first open meeting as the Director of the Division of Corporation Finance. Meredith arrives at a time when the nation continues to experience financial turmoil and when the SEC is at one of the most important moments in its history. It is a time when we must redouble our efforts on behalf of investors. Clearly, there will be a significant amount of regulatory action to come out of the Division of Corporation Finance, and this agency as a whole. Thank you Meredith for accepting these challenges, and thank you for returning to the agency to help the Commission, working with your colleagues, to serve America’s investors and to oversee our capital markets.
I also must note the Division has operated without missing a beat under the interim leadership of Shelley Parrat and Brian Breheny, with contributions throughout the staff — a true team effort. To all of you, thank you and good job.
This good work is reflected in the proposals before us today.
One of the recommendations from the Division of Corporation Finance before us is a proposal to help companies receiving assistance under the TARP program implement their obligation to provide investors with a “say-on-pay”, by providing for an advisory vote on the company’s compensation of executives.
This is a straightforward proposal. The advisory votes are required by law, and the proposed rules should help to implement the requirements efficiently.
Accordingly, I am happy to support the recommendation and look forward to public comments.
Let me turn now to the proposal discussing several proxy disclosure enhancements. There are several important corporate governance-related disclosures discussed in the proposal.
As SEC Commissioners, we are charged with providing investors with the information they need to make informed decisions on the proxy ballot and in their investment accounts. The information that investors need is not static, and our rules must keep up with their needs. I commend the staff for preparing today’s proposal to help ensure that we provide investors with the disclosures they need in today’s marketplace.
This proposal is very timely. The proposal we are considering today is designed to provide important information on a number of important topics. Investors care a great deal about corporate governance - and their interest continues to grow at an even greater rate because of the economic turmoil. Many of the amendments proposed today are designed to enhance disclosure about the relationship of a company’s overall compensation policies to risk, director and nominee qualifications, company leadership structure and the potential conflict of interests of compensation consultants.
All of these topics are important to discuss and have already been discussed in great detail this morning.
I would like to highlight one additional topic. The release before us also solicits comments concerning disclosures related to board diversity. Because of the importance of boards of directors, investors increasingly care about how directors are appointed, and what their background is. This is especially true as American businesses increasingly compete in both a global environment, and in a domestic marketplace that is, itself, increasingly diverse. In this ever more challenging business environment, the ability to draw on a wide range of viewpoints, backgrounds, skills, and experience is critical to a company's success.
It should be no surprise that studies indicate that diversity in the boardroom can result in real value for companies — and for shareholders. It also should be no surprise that many investors — from individual investors to sophisticated institutions — have asked the Commission to provide for disclosures about the diversity of corporate boards and a company's policies related to board diversity.
Like these investors, I care a great deal about diversity in corporate America, including in the board room. Accordingly, this proposal raises the issue of whether investors and other market participants believe that diversity in the boardroom is a significant issue. We are soliciting comment on whether we should amend our rules to provide for disclosure of whether diversity is a factor a nominating committee considers when selecting someone for a board position. We also seek comment on whether we should amend our rules to provide for additional or different disclosure related to diversity.
I would like to thank the staff again for this proposal, and for working with me and with my counsel, Zak May, on this topic.
The last item on today’s agenda is the proposal by the New York Stock Exchange to amend its rules so that only shareholders — not brokers holding their securities as intermediaries — vote on the election of directors.
The right to elect the directors of a corporation is a fundamental shareholder right, and a shareholder’s vote on a director is one of the most important decisions a shareholder makes. The current NYSE rule on broker voting in uncontested director elections allows shareholder inaction to translate into an actual vote. This is an odd result on such a critical matter.
The NYSE has proposed to change its rules so that voting results on director elections will only reflect the affirmative decisions of shareholders.
This is an important reform and I congratulate the NYSE and our staff for their work on this. I also look forward to ongoing Commission efforts to examine the proxy voting system more generally.
I also strongly support the NYSE in its work on investor education. The NYSE proxy working group recommended that the NYSE lead a large scale investor education effort to inform shareholders about the proxy voting process. I believe that these, vital and sorely, needed efforts should be focused on retail investors. I look forward to a robust educational effort that will have real impact.