SEC Commissioner Daniel M. Gallagher delivered a speech at the Forum for Corporate Directors, focusing on reforms for the corporate disclosure system and the proxy advisory industry.
Commissioner Gallagher stated that, while the SEC is a disclosure agency, and it is important for information about public companies to be made available to the public, there is such a thing as too much disclosure. According to Commissioner Gallagher, the complexity of today’s disclosure requirements gives the SEC cause for self-examination, and he would “prefer to address discrete issues now rather than risk spending years preparing an offensive so massive that it may never be launched.”
He suggested “practical issues” on which the SEC should focus, including “layering disclosure,” which is based on the recognition that some information is inherently material, such as a company’s financial statements and some is not, such as pay-ratio calculation. Gallagher also noted that the SEC should explore the potential of technology to help improve corporate disclosure, as well as make efforts to recognize politically motivated disclosure mandates.
Commissioner Gallagher also discussed the role of the proxy advisory industry, which he has frequently spoken about in the past. According to Gallagher, the “outsized role” that proxy advisory firms have gained in corporate governance is largely a result of the unintended consequences of SEC action. Gallagher stated that the SEC roundtable on proxy advisory firms in December 2013 was an important first step toward proxy advisory reform, but that there is still much work to be done in considering the next steps.