The SEC became increasingly concerned about the extent and clarity of proxy disclosures. Shareholders, forced to rely on corporate boards to manage the affairs of corporations, were often provided incomplete and inadequate information about the internal business of companies. The SEC began to address those concerns by passing rules that increased the nature and extent of required proxy disclosures to shareholders.
The power and responsibility accorded proxy regulations would arise again in 1970 in Medical Committee for Human Rights v SEC, (12) when a shareholder of Dow Chemical sought inclusion in the company's proxy of a request to corporate directors for the company to stop selling napalm to any buyer unless there was a reasonable assurance that the product would not be used against any human being. Dow refused to include the statement and the SEC declined to take action to force the inclusion.
Medical Committee appealed that ruling to the D.C. Court of Appeals. The court's ruling strongly suggested that permitting the company to exclude the proposal would contravene the purposes of the proxy provision of the Act, and sent the case back for further hearings. The effect of this ruling, in spite of the position proposed by the SEC, was to more firmly establish the procedural and substantive rights of shareholders wanting a greater voice in corporate governance issues.
(12) Medical Committee for Human Rights v. SEC, 432 F.2d 659 (1970).
