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Nazareth Reviews Electronic Proxy and Executive Pay Proposals

In remarks at an annual Rocky Mountain securities conference, SEC Commissioner Annette Nazareth reviewed the SEC's proposed electronic proxy and executive compensation proposals along with other recent trends in corporate governance. She observed that many companies have voluntarily improved their corporate governance policies. Shareholders have actively promoted corporate governance proposals in a range of areas such as the elimination of super-majority provisions for business combinations or takeovers, the elimination of staggered boards and the replacement of plurality voting systems with majority voting. Nazareth said that shareholder proposals which receive significant support may lead companies to adopt such measures and avoid proxy contests. 

The SEC's electronic proxy proposal has raised a number of concerns, according to Nazareth. One of those concerns is that proxy contests may be conducted by non-issuers over the Internet for purposes other than the election of directors, thereby avoiding the rule 14a-8 requirements. Some issuers fear that proxy contests of this sort will increase dramatically and boost the costs of defending against them. Nazareth said all of the concerns are being studied and she is optimistic that the SEC will find a result that allows the effective use of Internet technology for delivering proxy statements to investors.

In connection with the SEC's executive compensation rule proposal, Nazareth said the plain English requirement may be its single most important aspect for individual investors. She acknowledged the opposition that has been raised to the so-called "Katie Couric provision" and agrees that it should be reconsidered. Nazareth said many commenters have raised legitimate concerns about the privacy and competitiveness issues that the disclosure of compensation of up to three non-executive officers would raise.

Nazareth reported that a number of companies have voluntarily included information in their proxy materials similar to that suggested in the SEC's proposal, such as the total compensation figure or a compensation table for directors. She added that the executive compensation proposal is compatible with the electronic proxy proposal. Taken together, Nazareth said the rules may make proxy materials more user-friendly.