Corporate Governance

Mary Schapiro and the Developing Agenda

By J. Robert Brown

The Chairman of the SEC, Mary Schapiro, gave a speech on Friday that struck the right tone.  First, in an agency demoralized, one just put through the irascible testimony of Harry Markopolos, who lambasted the SEC and suggested that "the people who are coming to the SEC are too young" and the agency should look to hire "old foxes," she recalled the SEC that has long been known in the industry.

• The SEC is a proud institution with a remarkable history and a tradition of activism. In the days ahead, we will rise to the new challenges of today's financial and regulatory realities, both by embracing new approaches and by maintaining the great traditions that have defined this institution throughout its history.

The speech also sounded a warning to those in the market, particularly Wall Street.  The SEC was back.

• But make no mistake. Regulation is a two-way street. The "regulated" need not wait for a regulator's reforms, though they will come. At a time when investors are appalled at the ways of Wall Street, it is there that change must begin. A strong and reinvigorated SEC will be on the beat like never before to catch wrongdoers. But there needs to be a new era of responsibility on Wall Street and throughout our markets to ensure that wrongs don't occur in the first place. The sooner that Wall Street works to repair its own problems, the sooner investors will once again find the confidence to invest in what should be the finest markets in the world.

And lest anyone think this was the only mission of the Commission, Chairman Schapiro repeated that high on the agenda would be "giving shareholders a greater say on who serves on corporate boards, and how company executives are paid."  Access and say on pay, in other words.

Finally, despite being on the job for only two weeks, the speech was more than platitudes and future directions.  Enforcement would be unleashed from the absurd bureaucratic limits imposed under the prior Commission in connection with the negotiation of penalties with public companies.

• As a first, but significant, step in empowering our Enforcement staff, I am this week taking action to end the Commission's two-year "penalty pilot" experiment, which had required the Enforcement staff to obtain a special set of approvals from the Commission in cases involving civil monetary penalties for public companies as punishment for securities fraud.

In addition, delays in approval of formal orders (orders authorizing the staff to issue subpoenas) would be reduced or eliminated.  Finally, with respect to those somehow calling for an elimination of the SEC (presumably by combining its functions with another agency), it will have to be done over the opposition of Mary Schapiro.  As she noted: "No other agency does what we do. Because of the unique role the SEC plays in our markets, I am confident the SEC will emerge from this process stronger and more relevant than ever before."

It is early in Schapiro's tenure but the indications are she's striking the right chord and moving in the right direction.

Full post as published by The Race to the Bottom on February 09, 2009 (boomark / email).