Study Shows Benefits of Shareholder Involvement in Auditor Selection

Two days before Christmas, the Securities Exchange Commission (SEC) gave GE and Alcoa leave to exclude from their 2012 annual meetings a shareholder proposal not to their liking, one calling for rotation of the companies’ external auditors. Some weeks earlier, the commission did the same for Hewlett Packard, Walt Disney, and John Deere, and early in the New Year, for AT&T, General Dynamics, and others. This was all on the grounds that such proposals run counter to a decades‐old rule excluding from proxy materials proposals that will affect firms’ “ordinary business.”

These episodes constitute the latest chapter of a longstanding controversy surrounding what is generally a thoroughly routine aspect of corporate governance ‐ stockholder ratification of firms’ choice of external auditors. Companies have been inviting investors to weigh in on this since the 1930s, and the great majority continues to do so today; yet, oddly enough, the shareholders’ actual right to have a say on auditor selection has remained uncertain ‐ notwithstanding the recommendation of a blue‐ribbon Treasury commission in 2008 that annual shareholder ratification be mandatory.

Read More : “Study Shows Benefits of Shareholder Involvement in Auditor Selection” an article by AccountingWEB

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