SEC considers asking banks to justify director appointments
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New rules proposed by the US Securities and Exchange Commission (SEC) hope to bring transparency to the appointment of directors
WASHINGTON, DC - The US Securities and Exchange Commission is considering new rules that would force banks to justify appointments to board-level committees. The rules would require companies to disclose information about directors' skills and experience on issues ranging from executive pay to accounting rules. The move stems from criticism over appointments of PR-driven board and committee members such as General Tommy Franks - leader of the 2003 US invasion of Iraq - to Bank of America's audit committee, and cyclist Lance Armstrong's previous role as director of Morgans Hotel Group.With these new rules, the SEC is seeking to ensure companies appoint experienced directors rather than those who simply look impressive on the roster. Politicians, ex-heads of state and athletes are often recruited by firms as board members, but the financial crisis has shown that boards have been woefully inadequate in acting as a check and balance on the activities of their firms.
SEC chairman Mary Schapiro introduced three proposals on July 1. The first requires public companies that are recipients of financial assistance under the Troubled Assets Relief Program to provide separate shareowner votes on executive compensation. The second is designed to improve disclosure to shareowners on matters of compensation and corporate governance. This would require proxy and information statements issued by public companies regarding the relationship of their compensation policies to risk, the qualifications of directors, executive officers and nominees, corporate leadership structure, and potential conflicts of interests of compensation consultants. The final proposal will eliminate broker discretionary voting for elections of corporate directors.
Click here for the proposals.
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