This week, the Securities & Exchange Commission made headlines by inviting public comment on the proxy system's accuracy and integrity. After a string of shaky years that have inspired little trust, let's hope this is good news for investors.

Checking the plumbing
It sounds like the SEC definitely could stand to reexamine the proxy process's workings. Apparently, the regulatory agency hasn't taken a deep dive into the subject for 30 years.

According to The Wall Street Journal, SEC Chairman Mary Shapiro has dubbed this in-depth exploration "proxy plumbing," giving the impression that the process involves an intense review. The SEC plans to examine many elements, including:

  • Whether proxy advisory firms such as RiskMetrics and Glass Lewis should be subjected to further oversight, given potentials for conflict of interest
  • "Empty voting" (when shareholders place votes even though they have little or no financial stake in the company in question) and "over voting" (when more votes are cast than a broker is entitled to vote)
  • Proxy distribution fees
  • Improving the way shareholders communicate with other shareholders

Bear in mind that this "proxy plumbing" initiative is not related to the debate about the proxy access rule, which heated up during the financial reform bill's crafting. That dispute hinged upon whether shareholders should have easier access to corporate ballots.

Ways to win back trust
We've had a pretty active proxy season this year, with lots of drama and the occasional protest surrounding annual meetings at companies like Goldman Sachs (NYSE: GS) and Massey Energy (NYSE: MEE). Shareholders have also struck back with historical votes at a few high-profile companies, including Motorola (NYSE: MOT) and Occidental Petroleum (NYSE: OXY).

It's good that the SEC is now revisiting elements of the relationship between shareholders and corporation. Hopefully, the agency will encourage transparency and better communications, while eradicating unfair behavior and conflicts of interest. At the very least, let's hope nothing gets worse for shareholders.

The SEC formed in the midst of the Great Depression to advocate for investors. According to its own website, it aims "to restore investor confidence in our capital markets by providing investors and the markets with more reliable information and clear rules of honest dealing." Now, alas, the SEC's reputation could use a bit of polishing.

In late 2008, it became clear that the agency had let us down. For years, it's arguably seemed more interested in defending big corporate interests, to investors' detriment. Some of its staffers also spent an awful lot of time surfing for naughty downloads, even during the financial crisis. Thanks for the help, guys!

Reliable information and clear rules for honest dealing could help address the trust deficit in our marketplace. They might also help compensate for the frequent signs of corruption that swirl around regulatory agencies' dealings with big corporations.

Before you take comfort in simplistic calls for "regulation," remember that in many cases, the folks doing the regulating have come straight from the same companies they're now supposed to regulate. The cozy, questionable ties between oil company executives and the Minerals Management Service, back in the spotlight after the BP (NYSE: BP) Deepwater Horizon debacle, are only the most recent example of such dubious dealings. Clearly, something other than the Gulf of Mexico needs a thorough cleanup here.

The moves the SEC announced this week may not seem like top financial news, but they're important to watch. Investors should make sure that the agency's efforts to untangle the proxy process ultimately benefit shareholders more than corporations.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.