UPDATE 2-US SEC moves to shake up corporate governance

* SEC limits broker-dealer votes on corporate directors

* SEC proposes disclosing directors' qualifications

* Proposal would detail fees for exec pay consultants

* Advisory vote on executive pay at TARP recipients (Recasts; adds broker-dealer vote, say on pay, industry comment, detail on director disclosures)

By Rachelle Younglai

WASHINGTON, July 1 (Reuters) - U.S. securities regulators moved to change how companies elect board members and govern themselves, tilting the corporate playing field toward investors who have complained of weak boards and lavish pay for top executives.

The Securities and Exchange Commission on Wednesday proposed requiring companies to tell shareholders more about pay policies, board members' qualifications and why they chose a certain leadership structure.

The SEC also voted, 3-2, to adopt a long-standing proposal that would bar broker-dealers from voting for corporate directors on behalf of their clients unless told to do so.

"The most fundamental way in which shareholders can ensure that directors remain accountable to them is through the director election process," said SEC Chairman Mary Schapiro.

The action drew immediate praise from the Council of Institutional Investors and the country's largest labor federation, the AFL-CIO.

Investor activists have long complained that brokers who hold the voting rights of their clients' shares typically vote in accordance with management's wishes, tipping the scales in contested director elections.

"Counting uninstructed broker votes is akin to stuffing the ballot box for management as broker votes almost always are cast in favor of management's candidates for board seats," said Ann Yerger, executive director of the institutional investor group, whose members hold more than $3 trillion in assets.

The new SEC rule, which goes into effect in 2010, may give activists the edge they need to oust board members.

Both Republican commissioners on the SEC opposed the change. One of them, Kathleen Casey, said she was concerned that retail investors would be disenfranchised in favor of institutional investors.

The biggest U.S. business lobby, the U.S. Chamber of Commerce, agreed and said this new rule dramatically shifted additional voting power from individual shareholders to activist investors. "The SEC missed an opportunity to improve proxy voting participation and allowed certain investors to jump to the head of the line," the chamber said.

As mandated by Congress, the SEC also voted to give shareholders an advisory vote on executive pay at more than 500 companies that received taxpayer funds under the government's Troubled Asset Relief Program.