With unanimous approval, the five-member SEC board passed along the proposals that would require public companies and mutual funds to provide shareholders with specific information on the process for nominating candidates to the corporate board. This comes in addition to providing shareholders information on how to contact members of the board, according to a news release.
The SEC action follows a mid-July report – Staff Report: Review of the Proxy Process Regarding the Nomination and Election of Directors ( http://www.sec.gov/news/studies.shtml ) – on proposed reforms to give shareholders more access to corporate proxies. Among the additional information to be contained in the shareholder report:
- whether a company has a separate nominating committee and, if not, the reasons why it does not and who determines nominees for director
- whether members of the nominating committee satisfy independence requirements
- a company’s process for identifying and evaluating candidates to be nominated as directors
- whether a company pays any third party a fee to assist in the process or identifying and evaluating candidates
- minimum qualifications and standards that a company seeks for director nominees
- whether a company considers candidates for director nominees put forward by shareholders and, if so, its process for considering such candidates
- whether a company has rejected candidates put forward by large long-term institutional shareholders or groups of shareholders.
Additionally, the proposals call for important new information regarding shareholder communications with directors, including:
- whether a company has a process for communications by shareholders to directors and, if not, the reasons why it does not
- the procedures for communications by shareholders with directors
- whether such communications are screened and, if so, by what process
- whether material actions have been taken as a result of shareholder communications in the last fiscal year.
These proposals would also apply to proxy statements of registered investment companies in the same manner that they apply to other companies.
The SEC is will be seeking comment on the proposal for 30 days after their publication in the Federal Register. Final adoption of the changes requires a second vote by the SEC.
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