(The news featured below is a selection from the news covered in the Federal Securities Law Reporter.)

Glassman Provides U.S. Perspective on Corporate Governance 

In a speech delivered in Brussels, SEC Commissioner Cynthia Glassman provided the U.S. perspective on corporate governance. She described the decision-making hierarchy which is composed of management, the board of directors and shareholders, and explained that state corporate law and exchange listing requirements dictate most of the governance requirements for public companies. These three constituencies may have different goals and perspectives, Glassman noted. Given the scandals of recent years, management has been more closely scrutinized than in the past. Executive compensation and incentives have also become the focus of public debate.

Glassman said that she has been concerned about the trend to look to increased director independence to prevent future misconduct. Heightened independence has not prevented subsequent crises, she said, and the evidence is inconclusive as to whether there is a correlation between independence and performance. Every time a crisis erupts, Glassman said the response is to increase board independence. She is concerned that independence is being treated as a substitute for other important qualities such as experience, knowledge and diligence.

An emerging trend in the U.S. is an increase in institutional investor and shareholder activism, according to Glassman. Institutional investors more frequently submit shareholder proposals to push for reforms in areas such as staggered boards of directors, majority voting, director qualifications and executive compensation. This activism in some cases may encourage reform for the benefit of all shareholders, but Glassman said she does not see it as a definitive solution to preventing corporate misconduct. In her view, fund managers' key concern should be the fiduciary duties they owe to their own investors, not the corporate governance policies of companies in which they invest.

In the area of executive compensation, Glassman said the SEC should consider a U.K. practice that requires companies to disclose the full inventory of each named executive's options, including the award, the vesting and the expiration dates and the exercise price of each award. The SEC will soon consider the adoption of a final executive compensation disclosure rule, she advised.

The recent discovery of instances where companies back-dated stock options have received a lot of attention lately. Glassman noted that changes to the SEC's reporting requirements may have solved the problem going forward. Although the adoption of shortened deadlines for reporting option grants was unrelated to back-dating, Glassman said the positive unintended consequence is that it eliminated the opportunity for companies to back-date awards before they have to disclose it.

Many shareholders have called for companies to adopt majority voting for director elections in place of the current, and more common, plurality voting. Either of these models are available to companies, she added. Glassman said that majority voting makes sense, but she is not sure of the best way to get there. Many companies are voluntarily adopting the majority voting model, she reported, while in other cases shareholders have approved proposals for majority voting. A committee of the American Bar Association is currently working on a proposal to recommend revisions to state corporate law to encourage majority voting, she added.

Glassman's tenure at the SEC ends this month. She said that one of the highlights of her time at the SEC has been working with colleagues outside the U.S. in forums such as the ECGI/ALI 2006 transatlantic conference at which she spoke. A global dialogue has never been more important, she said, and all jurisdictions will be better off if they work together with the common goal of protecting investors and strengthening markets.