SEC's proxy reforms fail to meet goals, study find

by Dennis Brown

Reforms adopted in 1992 by the Securities and Exchange Commission (SEC) that were intended to empower stockholders and bring in line the salaries of chief executive officers have instead hindered business, according to a new study coauthored by Margaret B. Shackell, assistant professor of accountancy at the University of Notre Dame.p. The SEC reforms required companies to prominently disclose executive compensation details that previously had been difficult to find in shareholder proxy statements. The new regulations also gave shareholders the right to put executive pay packages to a vote.p. p. The researchers found that market reaction to the reforms was generally negative, possibly because they increased the likelihood of small, unsophisticated shareholders with single-issue political agendas advancing proposals that made poor business sense.p. The analysis of specific proposals found that while the new SEC regulations increased political pressure on firms regarding executive compensation, the companies that received the most shareholder proposals were not those with salaries packages that were out of line with performance, but rather those that were politically visible.p. Joining Shackell as coauthors of the study were Karen Nelson, assistant professor of accounting at Stanford University, and Marilyn Johnson, associate professor of accounting at Michigan State University.p. Shackell joined the Notre Dame faculty last year after earning her doctorate from the University of Michigan and her master’s and bachelor’s degrees from the University of Waterloo.

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