Commentary: SEC does a deal on dissidents

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The design behind the reform of rules governing American annual meetings is finally becoming clear after almost a year of uncharacteristically activist revision of corporate governance regulations by the Securities and Exchange Commission.

Under the controversial stewardship of its chairman, Richard Breeden, the commission has been seen to side with dissident shareholders - for the most part large state pension funds and institutional investors - forcing managers to open themselves to proxy votes on a range of issues traditionally regarded as their exclusive purview.

In June, the SEC voted to require US corporations to provide shareholders with clearer information on what they pay their executives, and made it easier for them to collaborate with each other without having to file formal documents with the commission. Earlier this month it insisted that under-performing managers permit shareholders to vote on their compensation.

It is all a far cry from the laissez-faire attitude of the 1980s.

But forget the notion of the SEC as an agent of social change. Last week it ruled against allowing a liberal New York pension fund to force a vote on a discrimination case involving the sacking of a dozen homosexuals by a Tennessee firm.

The message was clear: the trade-off for more say in corporate performance is less say in a company's social policy. Analysts expect the new doctrine will extend to other areas. The immediate effect will be to keep votes on 'rank-and-file employment issues' off the agenda of AGMs.