SEC Proposes Ending Oversight of Shareholder Voting — a Blow to Reformers

The U.S. Securities and Exchange Commission (SEC) proposed on Wednesday to end federal oversight of corporate shareholder votes on topics such as climate change or executive pay — a move critics describe as a severe blow to corporate reforms.

The step, announced last month, is part of a broader shift of power from investors to corporate managers by the SEC, which now counts three Republican commissioners and two seats left vacant by Democrats. The Wall Street regulator also proposed other changes, such as removing the rule that requires companies to produce glossy annual reports, which in its view duplicates the information in official annual reports (Form 10-K).

SEC Chairman Paul Atkins said in a statement that the SEC has no statutory authority to oversee shareholder voting and that this area is better managed by the states — some of which, like Texas, offer companies favorable treatment when they choose to incorporate there.

Investor resolutions on topics such as carbon emissions, workforce diversity or executive pay have been at the center of many corporate annual meetings, even though their number has declined in recent years. Activists fear that dismantling these processes will reduce their influence on issues such as the environment or CEO pay.

The proposals will now be subject to the public comment period and further SEC decisions. In a statement, New York State Comptroller Thomas DiNapoli said: “For more than 80 years, the shareholder proposal process has been a cornerstone of American corporate governance” — accusing the SEC of having “chosen to allow corporate managements to shield themselves from accountability”.

Source: Reuters