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SEC Presses Dell, Amex, Others in Broad Sweep for Proxy Details

Nov. 7, 2022, 10:00 AM

Wall Street’s watchdog launched questions at more than a dozen major companies including Dell Technologies Inc., Humana Inc., and American Express Co. seeking information on how their corporate boards oversee company risks.

The US Securities and Exchange Commission since August has sent the companies wide-ranging inquiries about their 2022 proxy statements, recently released correspondence shows. The letters press the companies to reveal more details in the annual forms they provide to shareholders ahead of votes on executive bonuses, boards of directors, and other important corporate governance matters.

The SEC asked the companies to describe how their boards of directors evaluate risks, whether they consult with outside advisors to anticipate future threats and trends, and how their risk oversight process aligns with disclosure controls and procedures, according to letters the SEC started making public last week. The regulator asked some companies to justify their leadership structure and to spell out circumstances under which they’d have the company chair and CEO roles filled by the same person.

The SEC in past years has rarely sent standalone inquiries to companies about their definitive proxies.

The new inquiries are part of an SEC effort to encourage transparency about board leadership and risk oversight ahead of next year’s proxy season, said Cicely LaMothe, acting deputy director in the SEC’s Division of Corporation Finance at a Practising Law Institute securities conference on Thursday.

“We are pretty much just asking for confirmations that you’ll think about that for your future disclosures,” she said.

Other companies queried include Heartland Express Inc., ServiceNow Inc., Sherwin-Williams Co., and Fidelity National Information Services Inc. The letters are almost identical to each other and don’t tell companies to revise their old proxies from this past spring. But all of the companies responded and pledged to provide more proxy details going forward.

“Our comments are really meant to provide a few guideposts along the way to consider, but by no means are they meant to create a stopping point or be prescriptive. It’s not intended also to provide a blueprint for disclosure,” LaMothe said.

The SEC under Chairman Gary Gensler has taken steps to empower shareholders and proxy advisory firms, while making it harder for companies to win SEC approval to cast aside proxy proposals.

In past years, companies seldom received standalone queries on their annual proxy statements. The Division of Corporate Finance would typically ask about proxy statements at the same time it asks about financial information in other filings, such as 10-Ks and 10-Qs.

LaMothe indicated that the proxy statements will continue to get specialized attention from the SEC. The SEC expects to take another look at company disclosures across the board, not just at the businesses that have received comments, to see if there have been any changes or “improved transparency,” LaMothe said.

— With assistance from Andrew Ramonas.

To contact the reporters on this story: Nicola M. White in Washington at nwhite@bloombergtax.com; Clara Hudson at chudson@bloombergindustry.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; Michael Ferullo at mferullo@bloomberglaw.com