SEC Orders More Disclosures for Corporate Shareholders

The Securities and Exchange Commission (SEC) has approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies.

Beginning in the upcoming annual reporting and proxy season, the new rules will heighten disclosure requirements regarding risk, compensation and corporate governance matters when voting decisions are made.

Good idea, no? As SEC Chair Mary L. Schapiro said in response: "[A]ccountability is impossible without transparency."

It seems the SEC has been considering the recent compensation controversy, and the new rules make it far more likely shareholders will make noise over excessively high salaries.

Specifically, the new rules require disclosures in proxy and information statements about:

• The relationship of a company's compensation policies and practices to risk management;
• The background and qualifications of directors and nominees;
• Legal actions involving a company's executive officers, directors and nominees;
• The consideration of diversity in the process by which candidates for director are considered for nomination;
• Board leadership structure and the board's role in risk oversight;
• Stock and option awards to company executives and directors; and
• Potential conflicts of interests of compensation consultants.

The new rules, which will be effective Feb. 28, 2010, also require quicker reporting of shareholder voting results.