The folks over at the Securities and Exchange Commission have been pretty busy this year. So far in 2006, they’ve already proposed rules on executive compensation disclosure, mutual fund fees, commodity trading, short selling and more—including the Section 404 extension for non-accelerated filers. And just last month the SEC announced it would propose an amendment on director nomination rules.

And that regulatory agenda wasn’t even the half of it. This year, the Commission released its critical policy statement concerning financial penalties, advanced its XBRL initiative, increased regulatory collaboration abroad, held roundtables on Section 404 and other issues, issued a final report on smaller public companies’ compliance with Sarbanes-Oxley and approved landmark proposals from NASDAQ and the NYSE.

The SEC has also been busy on the enforcement side of the house, settling actions with Prudential, Martha Stewart, Raytheon Corp., The Tribune Co., Tyco, Bear Stearns, AIG, several KPMG partners, McAfee, and more than a dozen broker-dealer firms. Charges were also brought against Comverse Technology, Morgan Stanley, the Renaissance Asset Fund, a few former Brocade Communications System executives and many others, including several military suppliers and stock-picking Web sites.

And all that during a year of incredible transition for the Commission, when it underwent a major infrastructure upheaval and replaced numerous key personnel, including the general counsel, chief accountant, director of corporation finance, director of market regulation, director of investor education and critical regional leadership positions in Atlanta, Philadelphia, Boston, Fort Worth, Texas, and elsewhere.

So they’ve been busy, and SEC Chairman Christopher Cox should be commended for the Commission’s aggressive and open agenda.

But still, one SEC action remains that, well, isn’t getting any action: the proposed rule on Internet availability of proxy materials.

Floated back in December 2005, the proposal would enable companies to furnish proxy materials to shareholders by posting them on the Web.

The comment period on the rule expired nearly eight months ago, but the Commission still has not taken any final action on the rule, which is a shame.

The printed distribution of proxy materials is expensive and wasteful. NYSE-commissioned research recently found that nearly a quarter of investors either throw out proxies without reading them, or read “little to none” of the content. The proposed “notice and access” model—where companies would provide shareholders with a notice informing them that proxy materials are accessible online—would eliminate considerable waste, in both paper and money.

$2.1 billion Network Appliance, for example, noted that last year it spent $418,000 printing and mailing proxy materials. In a comment letter to the SEC on the proposal, the company went on to say, “We believe the annual cost savings resulting from the proposed rule changes will be in excess of $350,000, or more than 80 percent of today’s costs.” That savings would have more than doubled the company’s 2006 net income.

According to the chief legal officer of McDATA Corp.—a $614.4 million public company that inherited “a very large shareholder base due to a spin-off from a significantly larger company”—the proposal would save money in printing and mailing costs, and would provide “a more timely and informed dissemination of information.”

This proposal shouldn’t languish in the SEC’s Division of Corporation Finance. It’s a win-win for everyone.

Well, not everyone. The printing companies, for example—which generate billions annually by overcharging public companies for the dissemination of compliance documents—have much to lose from the Internet delivery proposal. Unfortunately, there aren’t many coherent objections anyone can make on the topic, which is why the printing companies’ comment letters to the SEC are whiny and somewhat laughable. “It is difficult to read long documents on a computer screen,” argued Bowne & Co. in its Feb. 13, 2006, comment letter. The company even attempted to obfuscate the proposal by attempting to insert performance standards for Web sites hosting the proxy materials. “If performance standards are not put into place, some issuer Web sites may not have the appropriate bandwidth to accommodate high Internet traffic volume or excessively large data files.”

Oy. You’re kidding me, right? That may have been an issue in 1996, but nearly the entire planet is broadband now—if teenagers can download music and movies without fail, investors should be able to download a crummy PDF.

The proposal on Internet delivery of proxy materials needs to see the light of day. And while there are components that can surely be tweaked, the Commission needs to move this along. It should also pursue its often advocated, seldom implemented “principles-based” approach, eschewing gory details (like the exact electronic document format to be delivered) and rather outlining the broad principles.

E-delivery needs to get off the backburner, so that public companies and shareholders can both begin to enjoy its benefits, convenience and efficiency.

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