Next, The Sec Should Zero In On Proxies

The Securities & Exchange Commission on Feb. 13 gave shareholders the right to question executive compensation through proxy resolutions. Even better, it proposed rules requiring that pay packages be disclosed in a more meaningful way. These admirable moves should please investors--as well as ordinary Americans--galled by the escalating compensation pocketed by U.S. corporate executives, no matter their performance. With one job well done, the sec should now move on to another: It should reform the proxy system to make managers more accountable to shareholders and shareholders more effective owners.

Many executives like the freedom they have under current rules, which are stacked against shareholders. But this freedom has poisoned management-investor relations. And it has made shareholders impatient with managers, who consequently shorten their investment horizons to the detriment of the nation's competitiveness.

Proxy reform, under study for two years, can help redress this imbalance. For example, the sec should require companies to turn over shareholder lists to other shareholders on a timely basis. And its prohibition against communication among stockholders who aren't engaged in a contest for control isn't necessary, though it may want to require them to notify the sec of their talks. And the sec should require--or at least encourage--companies to institute confidential voting of proxies.

These are simple changes, hardly likely to cause a revolution in America's boardrooms. But with responsible behavior on both sides, the reforms could eventually improve the relationship between managers who run corporations and the investors who own them.

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