The Securities and Exchange Commission will change the definition of "financial expert" in a proposed rule governing corporate audit committees so companies can pick from a larger pool of candidates, a majority of commissioners said Tuesday.
"We want to make sure we capture luminaries like Warren Buffett, Alan Greenspan and Paul Volcker who have experience in understanding financials and accounting principles," Commissioner Cynthia Glassman said in an interview.
The revised rule, which will be voted on today, will alter an earlier SEC proposal that defined a financial expert as someone with experience in "preparing or auditing financial statements." That wording would have limited candidates largely to accountants and former chief financial officers.
The draft rule was criticized by dozens of companies, including Ford Motor Co., Royal Dutch Petroleum Co. and Alcoa Inc., which said the definition was so narrow it would be hard to find and recruit such people for their boards.
SEC action on strengthening audit committees was mandated by the Sarbanes-Oxley corporate governance law, which was enacted in July after accounting scandals at Enron Corp., WorldCom Inc. and other companies. The new law seeks, in part, to bolster the oversight capabilities of corporate audit committees.
The initial proposal, which was issued for public comment in October, is being rewritten to broaden the definition, SEC commissioners Harvey Goldschmid, Roel Campos, Paul Atkins and Glassman said. Chairman Harvey L. Pitt declined to comment.
The commissioners, who constitute a majority of the five-member panel, said they want more flexible language and will vote to approve the revised rule. The rule still will require companies to disclose whether they have financial experts on their audit committees and, if not, to explain why.
"There is room for greater flexibility while still preserving the basic concept of financial expertise," Goldschmid said.
As originally written, the proposed rule would "dramatically limit the pool of individuals who both meet that definition and possess the other qualities public companies look for in a director," Ford Chief of Staff John Rintamaki wrote in a comment letter to the SEC.
The SEC, at its meeting today, also will vote on rules to expand companies' disclosures of profits and limit executive stock trades when employees can't sell 401(k) shares.
Another proposed rule before the commission would require companies to disclose if they have adopted codes of ethics for senior financial officers.
Other new rules would make stock analysts certify the views they express publicly and disclose pay they have received for those recommendations.