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Kai Ryssdal: The Securities and Exchange Commission threw a dose of cold water on the shareholder-rights movement today. It formally approved, as a rule, a guideline it’s been following for a long time — one that makes it harder for shareholders to nominate their own candidates to corporate boards of directors.
Advocates want investors to have more of a say in who runs the companies they own. They pressured the SEC to put off today’s vote because its Democratic commissioners are leaving, which has a direct effect on the rules corporations have to live by.
Marketplace’s Nancy Marshall Genzer reports.
Nancy Marshall Genzer: The SEC normally has four commissioners, two from each party. The chair belongs to the president’s party — that makes it hard for the commission to tilt too much in favor of big business or investors. But one Democratic commissioner quit this fall, and the other will be gone soon. That will leave an all-GOP commission in place, possibly until next spring.
That’s drawn the attention of Congressional Democrats. At a recent Senate hearing, New Jersey Democrat Robert Menendez wondered if SEC Chairman Christopher Cox was favoring big business. He said Cox was ramming through the shareholders’ rule that the SEC voted on today:
Rep. Robert Menendez:
Why this rush on such a complex and yet important issue?
Commissioner Cox replied that he wanted to get the vote out of the way before annual shareholders’ meetings start next year — because investors need stability.
Christopher Cox: The uncertainty is palpable.
Besides, Cox said, he’ll have the SEC revisit the issue this spring when two new Democrats should be on board. In the meantime, of course, the SEC will have to keep working.
The Democratic commissioner who left last September, Roel Campos, says chairman Cox does try to be fair — still:
Roel Campos: There will continue to be a perception on divisive issues that the commission wasn’t in its best position to render the best decision. And therefore, those types of rule makings will be subject to more attack.
Campos thinks lawsuits are coming — lawyers for investors are likely to argue that decisions taken by an incomplete commission aren’t valid. Columbia University law professor John Coffee says this is the most partisan atmosphere at the SEC in half a century.
John Coffee: Now we are getting to issues that tend to tip institutional investors on one side and business community and management on the other. And that turns into a Republican versus Democratic split — and there have not been compromises.
Those issues are piling up. There are cases involving back-dated stock options. The Commission also has to decide whether to adopt international accounting rules. They can be weaker than U.S. regulations. So does this mean that the SEC will overtly favor big business? Former SEC Chairman Arthur Levitt says no — and here’s why:
Arthur Levitt: You can’t suddenly wage a war against investors or against the business community. The process is subject to oversight, the process is subject to public scrutiny by the media. That sort of thing is not likely to happen.
Maybe nothing will happen — the SEC could put off these tough decisions until someone new moves into the White House. In Washington, I’m Nancy Marshall Genzer for Marketplace.
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