The Securities and Exchange Commission will consider this week whether to require mutual funds and other investment managers to disclose how they vote shares in their portfolios in corporate proxy contests, the Wall Street Journal is reporting this morning.

If the measure proposed by the SEC staff is adopted, it would be a significant setback for the mutual-fund industry and a victory for advocates of increased transparency in corporate governance matters. Those advocates maintain that investment managers should tell the ultimate owners of the securities how the managers have cast their ballots in shareholder votes on issues such as executive compensation or company directors.

The mutual-fund industry for the most part argues that investors don’t have a right to know how their fund managers vote on individual proxy issues and that such a rule is unnecessary in any event. Indeed, while pushing for increased disclosure from the companies they invest in, fund companies have been battling attempts for greater openness on their part — as in the case with proxy votes and more frequent disclosure of portfolio holdings.

This move is in line with what the SEC under Chairman Harvey Pitt has been doing on disclosure issues — getting more information out into the public domain. Under Mr. Pitt, the SEC has mandated that chief executives certify the accuracy of financial reports and has required companies to quickly disclose a new, longer list of material events that may affect their stock prices.

While the details of the SEC’s proposed rule couldn’t be determined, backers of increased disclosure were pleased the matter was coming to a vote.

The Investment Company Institute, the fund industry’s lobbying arm, repeated its opposition to such a rule. The proposed rule will be considered at an open meeting Thursday. In addition to requiring disclosure of their proxy-voting records, investment managers would be mandated to disclose the policies and procedures they use to determine how to cast their votes.

Generally, once a debate on a proposal is scheduled, commissioners are likely to approve an initial rule. Plus, given the spotlight on disclosure issues, the fund industry is going to be hard-pressed to derail it entirely.

But as part of the lengthy process, the SEC will set a public-comment period on the rule proposal, normally at least a month. Then, before taking a final vote on the matter, the commission will spend a few additional months reviewing the comments, which may result in modifications to the original rule proposal.

How mutual funds, which hold about $3 trillion in stocks and are often the largest stakeholders in public companies, vote shares in their portfolios has come under the spotlight in recent months in the wake of the Enron Corp. scandal and disclosure of other corporate-governance problems. Most fund companies — with the exception of a handful of small firms — don’t disclose their votes or their voting policies.