The SEC and the Institutional Investor: A Half-Time Report

Nothing that the Securities and Exchange Commission ("SEC") has done in recent years has been as controversial or significant as its efforts to reform the proxy rules to permit greater communication among shareholders. Nothing that it has undertaken recently has also been left as incompletely or equivocally realized as these same efforts. That the SEC's efforts at facilitating shareholder communication have been controversial and significant is by now a commonplace observation. That they are incomplete and equivocal requires more explanation.

Although the discovery that an agency is behaving inconsistently is hardly a revelation, more than politics appears to be at work here. Fundamentally, the SEC has been attempting to broker marginal reform at a time when two fundamentally conflicting perspectives on institutional investors are competing for dominance. One side sees the consolidation of share ownership in the hands of institutional investors as a benign and progressive development; the other, as potentially ominous and disruptive. In this battle of paradigms, the SEC appears to be zealously and outspokenly-on both sides.