SEC’s POSITIVE TEST
Making provision for shareholders’ nominees on boards of companies to further corporate governance which to do it is presently absorbed with is to go down as yet another typical example of frivolous ways of the Securities and Exchange Commission to address itself to engaging issues. Instead of turning to palliatives and rather than be petulant in dealing with companies which also is a way in which it has gone about its business, the SEC to be positive can devote time and attention to pertinent issues.
A striking instance is of voting rights. The prevalent practice in the US board election process permits existing director in contest of votes at the annual general meeting of the company to win his seat by one single vote cast in his favor. This may appear paradoxical. But the practice has prevailed by the proxy system.
For the proxy system is much too complicated and bears no relevance to either voting rights of shareholders or to the pattern of votes exercised at a company’s annual general meeting. This is one area of corporate governance begging for urgent reform.
To cap this is the queer listing stipulation of the major New York Stock Exchange for companies to comply. The rule lets brokers vote for clients’ shares where clients have not laid voting instructions. It so happens that instances of such unspecified votes are not scarce but substantial to make a sizable difference in voting.
Brokers, of course, are free to vote as they wish. But they would vote, as they like. And as brokers what they may like is what their vote gets in return. More so, where the vote is unrepresented by clients and come as bonus to the brokers.
Moreover, seeking and serving such vote is to be a matter of striking a bargain between the seeker and the server. Reduced simply to a matter of quid pro quo, without care for concern about right or wrong.
Call it, if you like, as capitalism’s conclusive facet. But it is of no credit to corporate governance.
Surely, the SEC knows this well. Just in case it did not, outside bodies in US corporate world have drawn attention of the SEC to deficiencies of the prevalent practices insofar as corporate governance is concerned.
But the SEC is unmoved.
However, herein is one positive test for the SEC in intent and purpose of corporate governance. But it is very much a question whether the SEC would so to say rise to the occasion and meet the test.
To do so will certainly be a daunting task, knowing how corporate interests are entrenched in the prevailing voting rights practices. Any amendments, alterations and changes in these will surely invite instant protests of corporate interests. Besides, making a difference in what is existing will require authorization in law. Which means a new legislation to make and getting lawmakers to agree to it. Much spadework to do before all this, moreover, to make the case and prepare the ground for the change to make.
Important at the same time is to examine how well arrayed the SEC can be to field objections to changes from concerned interests that may arise before the regulatory authority can be moving in the matter. For the objection can be devious enough to defeat the move. Will the SEC be able to field them effectively? This is to depend not only on its efficiency, but also its conviction.
But one thing is certain: to change the archaic voting rights the SEC is the one to qualify as the highest regulatory authority. So far as the work to go into it goes, the SEC is working full time into its proposals of shareholders to elect their nominees on boards of companies while it is also to give the proposals the form of formal regulations.
Bending so much for the surrogates of directors to act as mercenaries, the SEC might as well bend for the shareholders.
A striking instance is of voting rights. The prevalent practice in the US board election process permits existing director in contest of votes at the annual general meeting of the company to win his seat by one single vote cast in his favor. This may appear paradoxical. But the practice has prevailed by the proxy system.
For the proxy system is much too complicated and bears no relevance to either voting rights of shareholders or to the pattern of votes exercised at a company’s annual general meeting. This is one area of corporate governance begging for urgent reform.
To cap this is the queer listing stipulation of the major New York Stock Exchange for companies to comply. The rule lets brokers vote for clients’ shares where clients have not laid voting instructions. It so happens that instances of such unspecified votes are not scarce but substantial to make a sizable difference in voting.
Brokers, of course, are free to vote as they wish. But they would vote, as they like. And as brokers what they may like is what their vote gets in return. More so, where the vote is unrepresented by clients and come as bonus to the brokers.
Moreover, seeking and serving such vote is to be a matter of striking a bargain between the seeker and the server. Reduced simply to a matter of quid pro quo, without care for concern about right or wrong.
Call it, if you like, as capitalism’s conclusive facet. But it is of no credit to corporate governance.
Surely, the SEC knows this well. Just in case it did not, outside bodies in US corporate world have drawn attention of the SEC to deficiencies of the prevalent practices insofar as corporate governance is concerned.
But the SEC is unmoved.
However, herein is one positive test for the SEC in intent and purpose of corporate governance. But it is very much a question whether the SEC would so to say rise to the occasion and meet the test.
To do so will certainly be a daunting task, knowing how corporate interests are entrenched in the prevailing voting rights practices. Any amendments, alterations and changes in these will surely invite instant protests of corporate interests. Besides, making a difference in what is existing will require authorization in law. Which means a new legislation to make and getting lawmakers to agree to it. Much spadework to do before all this, moreover, to make the case and prepare the ground for the change to make.
Important at the same time is to examine how well arrayed the SEC can be to field objections to changes from concerned interests that may arise before the regulatory authority can be moving in the matter. For the objection can be devious enough to defeat the move. Will the SEC be able to field them effectively? This is to depend not only on its efficiency, but also its conviction.
But one thing is certain: to change the archaic voting rights the SEC is the one to qualify as the highest regulatory authority. So far as the work to go into it goes, the SEC is working full time into its proposals of shareholders to elect their nominees on boards of companies while it is also to give the proposals the form of formal regulations.
Bending so much for the surrogates of directors to act as mercenaries, the SEC might as well bend for the shareholders.
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