Disclosure-based regimes 'failing' in US

28 February 2010

The policy of regulating securities markets with disclosure requirements has not been successful in the US, as weak shareholder rights prevent boards being held to account.

This is according to Simon Wong of the Financial Times, who claims that such as "hand-off regulatory approach" requires stronger rights for shareholders by way of compensation.

He also argues that disclosure has been used "excessively" as an instrument of regulation, leading to an overabundance of information and promoting short-termism in the boardroom.

"It is questionable whether investors can digest the vast amounts of published information," the writer states.

He suggests that the relevance of disclosure requirements for companies should be reviewed periodically to prevent an overload of data.

The expert also suggests that the US could follow the example set in the UK, where director candidates must be elected with a majority vote, in terms of making boards more accountable.

In December 2009, the Securities and Exchange Commission strengthened its disclosure guidelines regarding risk management, compensation policies and corporate governance.