The debate over the merging of two financial reform bills is finally reaching its conclusion
Debate over merging the Restoring American Financial Stability Act 2010 and the Wall Street Reform and Consumer Protection Act 2009 is almost complete. Whatever form the final law takes, it will bring serious challenges for corporate secretaries. ‘We will live in a more unpredictable world with more things to vote on and less certainty about what the vote outcome may be,’ says John Seethoff, vice president and deputy general counsel at Microsoft.
Top of the priority list for reconciliation is proxy access. The House version mandates the SEC to adopt it; the Senate version would authorize but not require it to do so. This might not matter, as the SEC has already indicated it favors proxy access rules and recent indications suggest Congress may set a 5 percent ownership threshold, rather than leave it to the SEC’s discretion.
‘We will have to create systems to respond to all of the logistical implications of a shareholder nominee,’ says Seethoff. ‘It’s likely to be a complex process.’ For Darla Stuckey, senior vice president of the Society of Corporate Secretaries and Governance Professionals, proxy access can be counterproductive. ‘We are concerned that it can disrupt the carefully designed balance of skills and experiences of existing boards,’ she says, adding that rather than federalizing proxy access, it would be better to let firms work out their own rules with shareholders individually.
Say on pay is also set to be a major source of contention, although the House and Senate versions have similar forms. Seethoff says say on pay, if included in the final bill, would leave companies with little choice but to improve communication between shareholders,
directors and management.
It would also require more cooperation between the investor relations (IR) and corporate governance teams. ‘We need to work closely with our IR colleagues to understand why investors voted as they did and foster a dialogue that will involve the board and key investors to understand what should be changed.’
