The Empire Strikes Back

As seen in the Governance Gadfly.

            The SEC announced on Friday that it was extending its comment period on its proposal, announced in June 2009, to require public companies to allow shareholders to nominate directors for election under certain circumstances.  You can see the Federal Register publication of this announcement at http://edocket.access.gpo.gov/2009/pdf/E9-30076.pdf.

            While extension of comment periods for proposed federal regulations is not exactly front page news, even for people like me, it bears comparison with another regulation the SEC proposed in July and approved last Wednesday.  I’m talking about the new rule requiring more disclosure in proxy statements about compensation practices and their relation to risk, directors’ qualifications, conflicts of interest among compensation consultants, and other things.  For more, see http://www.sec.gov/news/press/2009/2009-268.htm.

            So why did the SEC approve the disclosure rule proposed in July, but extended the comment period for the shareholder nomination rule proposed in June?  It’s all about corporate control and the money that comes with it.

            Disclosure can be a bother, but it’s really no big deal.  Sarbanes-Oxley ushered in a new regime of disclosure about executive compensation, disclosure that’s meaningless in most cases because companies have figured out how to use a lot of words to say nothing while meeting technical compliance with the regs.

            Nominating directors is an entirely different issue.  Directors actually vote on matters of importance, including how much management decides to pay itself.  Yes, I know compensation committees are “independent,” but the reality is that they work for management.  If they don’t, they don’t get re-nominated.

            So my paranoid view of things is that management has decided that it needs more time to get its ducks in a row to put the full court press on the Commission to drop the proposed rule.  Hence the additional comment period.

            I hope I’m wrong,