By bizarre coincidence in the week of FinReg and proxy plumbing, I came across a particularly apposite episode of the ancient British sitcom, Are You Being Served? on Maryland Public Television. Grace Brothers department store was facing a hostile takeover and the cast were concerned that they would face a proxy fight. (I paraphrase, of course: Although there were many mentions of shareholders in the script, Mr Humphries, Captain Peacock, Mrs. Slocombe, et al., did not get into the details of proxy fights.) Transparency is not a core value at Grace Brothers, for the cast came up with a plan to impersonate missing retail investors in order to ensure a majority vote for the status quo.
In real life, 30 years after this series was made, the current flurry of activity around corporate governance may not be raising many laughs: Will the attempt to modernize the proxy process actually result in a higher voter turnout, better understanding of long-term value and improved shareowner communications? We’ll have to hope it will “ride up with wear,” as Mr Humphries used to promise… Keep up with this issue on NACD’s regulatory and legislative issues website.
On Wednesday, the SEC announced its decision to review the proxy voting system. This system, referred to by the SEC as “proxy plumbing,” includes shareholder voting, communication, and vote tabulation. The SEC is addressing current concerns in a concept release which will solicit comment from the investor and corporate community for 90 days after publication in the Federal Register. The concept release is intended to generate solutions with regards to three areas:
Enhancing the accuracy, transparency, and efficiency of the voting process
Determining whether the rules should be revised to improve shareholder communications and increase their participation
Determining whether the voting power is aligned with economic interests and whether the SEC’s disclosure requirements provide investors with sufficient information.
The SEC’s proposed solutions seek to improve vote accuracy and communication. It is unlikely that any changes to come out of this effort will be adopted until next year. NACD supports any regulations that bring clarity and accountability to the shareholder voting process. For more information visit NACD’s Legislative & Regulatory Update on NACDonline.org.