SEC’s Mary Jo White on Corporate Governance: Act Like Grown-Ups

Securities and Exchange Commission Chair, Mary Jo White, has a message for companies and shareholders: You’re big kids. Act like it.

Addressing a corporate-governance conference in Chicago, Ms. White sounded at times like a weary babysitter, urging companies and shareholders to try, whenever possible, to work out differences without asking the SEC to referee.

On a range of divisive issues, from investor proposals to whether unpopular directors should be forced to resign, Ms. White said: “I would like you to consider whether [SEC] rulemaking is the only way to solve these concerns.”

One hot-button topic is shareholder proposals. Thousands are submitted each year, typically falling into a few buckets: be more environmentally-conscious, disclose political contributions, let long-time investors nominate directors. Companies generally view them as a nuisance and often seek the SEC’s permission to ignore them. The agency received more than 300 such requests from more than 200 companies this proxy season, up 10% from last year, Ms. White said.

“I am not suggesting that management should never object to or oppose a shareholder proposal,” Ms. White said. “But companies in many cases should consider other possible steps they could take in response to a proposal rather than just saying no,” like compromising or agreeing to take certain steps in the future.

Letting these measures go to a vote can actually be an escape valve for pent-up shareholder frustrations, she said – “a relatively low-cost way of sounding out and preventing potential problems down the line.”

Another trouble spot: whether directors that fail to receive a majority of shareholder votes should step down. Many companies let the board decide whether to accept resignations of their fellow members, and a recent study found that 85% of such “unelected” directors were still serving two years later. The SEC could step in and explicitly require boards to explain their actions, “but any company that is serious about good corporate governance should provide such information on its own,” Ms. White said.

Even in one area Ms. White said the SEC is likely to act soon — potentially requiring “universal ballots” that let investors more easily pick and choose from competing slates of board nominees – she urged participants to pick up the baton themselves.

“Like so many issues that seem to unnecessarily have shareholders and companies at odds, this is one where you do not have to wait for the Commission to act,” she said.

In other words: Figure it out yourselves.


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