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Thursday, February 19, 2015

SEC Commissioner Showing Resistance Against Universal Ballots & Shareholder Disclosure

February 19, 2015 -- Today, SEC Commissioner Daniel M. Gallagher addressed the newly formed Proxy Voting Roundtable to address two issues: universal proxies and retail shareholder participation in the proxy process. In particular, the Commission is concerned about ways to increase shareholder participation in the voting process.

"I’m hoping we can hear about ways to make it less costly for individual shareholders to vote. Could we streamline our disclosures or make them less intimidating for retail investors without loss of informational content for institutional investors? This is obviously not an easy feat, but it is an important issue"
Gallagher also wanted to limit the number of votes that can be taken and suggested the use of technology to aid in the reformation.
For example, could we allow individuals to delegate the ability to cast their ballots so long as they are cast consistently with certain voting rules preset by the investor?
As for universal ballots, "let’s just say I’m trying to keep an open mind," Gallagher said. This has become an issue with companies and investor relations due to increasing attacks from shareholder activists against global warming, lack of board diversity or a number of other social issues. "What does this mean for the SEC?" Gallagher asks in the opening remarks.
Our responsibility in the corporate governance arena is a limited one: it is to ensure that our rules establish a level playing field. I’m therefore interested in hearing from our panelists about the pros and cons of universal ballots, as one stand-alone option in this area, including how they may affect the relationship between shareholders and management.
He then goes on to commend an approach recommended by Professor Guhan Subramanian in the Harvard Business Review. The professor suggests using staggered boards and tightening disclosures of activists positions which is an argument for less disclosure. Commissioner Kara Stein is for universal ballots, however, she has also accused her colleagues of being more interested in decreasing the amount of disclosure required rather than improving it, which is what this debate boils down to.

To read the opening remarks in full click here.

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