The Shareholders’ Bill of Rights Act, sponsored by Senator Carl Levin (D-Michigan), reforms accounting regulation and increases auditor independence, according to a Levin statement.
Under the bill, the SEC couldn’t prohibit shareholder proposals allowed by state law to remove or replace a director, retain or replace the company auditor; ensure director independence, and get public disclosure of the pay package for any director or officer.
Another provision would require shareholder approval of any stock option compensation plan that would not be shown on company financial statements as an expense.
According to Levin’s statement, the bill:
- bars audit firms from auditing their own accounting work and from providing nonaudit services during the length of a contract with a client and for 24 months after that
- directs the Securities and Exchange Commission (SEC) to require that the audit committee of a publicly traded company properly oversee the firm’s accounting practices to make sure all financial statements are accurate
- reforms the Financial Accounting Standards Board (FASB) by creating an independent funding source and requiring the FASB to promptly deal with matters brought before it with public input
- forces the SEC to put together regulations about how companies in bankruptcy handle executive and director compensation and company loans to officers and directors
- directs the SEC to require a publicly traded company to provide all material information to its auditor
- prohibits the SEC from blocking certain shareholder proposals and to require that shareholders approve certain stock option grants.