February 9, 2006
The proposed new regulation that would allow corporations to issue electronic proxy statements and annual reports in lieu of printed versions. This proposal fails to create open communication between investors and corporations, and instead erects further barriers.
Since the implementation of Sarbanes-Oxley, the SEC has taken considerable steps to make financial information more available and comprehendible to the average investor. This new proposal will create additional hurdles for shareholders in gaining access to corporate financial information. Investors will no longer be able to open their mail and have instant access to a printed copy of important financial data. This proposal does give the right to request a paper copy however, the investor would have less time to evaluate such information.
The SECs proposal has an unsettling elitist undertone, marginalizing the importance of average shareholders--those who are at the greatest risk of being hurt by corporate scandals--in favor of making things easier for corporations. It seems clear that Congress intended Sarbanes-Oxley to protect the average American investor rather than to make things easier on Americas corporations.
It is easy to forget in this technological age that many people to do not have easy access to the Internet. As a result, those without such access will find themselves less important in the eyes of corporations, which could result in companies catering to the interests of large institutional investors. The SECs proposal will leave many investors, who rely exclusively on the honesty of such corporations in procuring a secure retirement, vulnerable and in the dark.
Printed copies bare greater moral and ethical responsibility than electronic copies do. The printed word carries strong social and cultural implications, resulting in words being set in stone. Electronic copies are in some ways exempt from this permanence, existing one day and gone the next. It is easy to imagine the possibility for abuse and manipulation with data available only in cyberspace. No one can deny that electronic documents will be an important part of the future as corporations attempt to embrace the Internet, but hard copies are still necessary.
The SEC should encourage Americas corporations to reach out to all of their investors, with or without Internet access, through multiple mediums, thereby presenting themselves openly and honestly. Financial statements benefit enormously from existing in printed form, giving investors something they can pick up, hold, read, and most importantly, trust.