In April, the Securities and Exchange Commission (SEC) put out a concept release on modernizing certain disclosure requirements in Regulation S-K, basically the guiding document for the disclosures that public companies must file in their periodic reports. The National Association of Manufacturers (NAM) took the opportunity to comment on the release, raising strong concerns with existing disclosures and also recommending against additional disclosures that add to the compliance burden without providing any additional benefits to investors. Read More
Wrapping up loose ends in our blogging on the Senate financial regulation bill, we should note that the Senate did not consider Sen. Arlen Specter’s amendment to overturn the U.S. Supreme Court’s ruling in Stoneridge v. Scientific Atlanta, which would have expanded liability in securities fraud litigation to manufacturers and suppliers who took no part in the scheme. The NAM had “Key Voted” against the amendment, which would have empowered class-action attorneys to find more deep pockets they could dig into.
The reality is that with Sen. Specter’s defeat in the Pennsylvania Democratic Senate primary, he loses much of his ability to push unpopular legislation like the Stoneridge amendment.
Legislation from Sen. Herb Kohl (D-WI), on the other hand, definitely remains in play, even though his amendment, to overturn the U.S. Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., was not considered. The amendment, S.Amdt. 3788 also known as the Discount Pricing Consumer Protection Act, would have made resale price maintenance agreements per se violations of federal antitrust laws. Passage would be disservice to consumers and invite more litigation. (See this Shopfloor post for an explanation.)
Unfortunately, the Senate bill — S. 3217, converted into H.R. 4173 — does include “proxy access” provisions to federalize corporate governance rules and allow outside groups — unions, activists, etc. — to force their way into corporate decisionmaking to the detriment of the shareholders.
McClatchy covers the story today, Senate financial overhaul could bring change to the boardroom”:
Many lawmakers weren’t even aware that the provision was in the bill, said Sen. Judd Gregg, R-N.H., blaming the size of the 1,400-plus page bill.
“It is an inappropriate idea, especially inappropriate for the federal government to bury it in this bill. This language applies to every publicly traded corporation in America, not just the financial institutions. Why is it buried in this bill? It should not be in there,” Gregg said.
While the National Association of Manufacturers has made the investment-discouraging derivatives provisions of the financial regulation bill its focus of attention, S. 3217, other sections of the bill would also add uncertainty and increase the costs of doing business in the United States. The Washington Post, among others, caught up on those provisions over the weekend. For example, there’s the corporate governance language, which would allow special-interest groups like organized labor and environmentalists to force their political agendas upon stockholders.
A rush of chief executives from a wide swath of industries has been coming through Washington over the past three weeks, talking to lawmakers about a long-debated issue called “proxy access,” which would make it easier for shareholders at all publicly traded companies — not just banks — to nominate board directors. Opponents say the rule has nothing to do with overhauling Wall Street and doesn’t belong in the legislation.
“This is our highest priority,” said John Castellani, president of the Business Roundtable, which represents 170 chief executives. “Literally all of our members have called about this.”
The NAM and other business groups signed a joint letter to Congress last month sharply opposing the provisions.
The consumer protection provisions of the financial regulation bill also represent a major expansion of government control over the economy, directly through the federal government as well as indirectly — and potentially even more damaging — through state attorneys general and their political allies in the plaintiffs’ bar. The Post’s story, “Lawmakers, financial firms push to limit state power on consumer protection,” reports on the efforts by Sen. Tom Carper (D-DE) to rein in the most harmful elements in the bill.
Carper said he shares the White House’s goal of establishing a new consumer protection bureau to guard against fraud and deceptive practices.
“All my amendment says is that we should make that bureau do its job. This is the cop on the beat that we need,” Carper said. He warned that if state regulators are also allowed to pursue cases against national banks, this would cause confusion as consumer protection rules are interpreted differently by dozens of separate governments.
Carper’s amendment, which would limit the ability of state attorneys general to enforce federal law against national banks, has more than a dozen sponsors on both sides of the aisle. It could come up for debate early next week.
Sen. Carper’s amendment is S.Amt. 3949, and the text is available here.
The NAM has also opposed Sen. Specter’s amendment to expand liability in securities fraud litigation to parties not involved in the fraud, i.e., his attempt to overturn the U.S. Supreme Court’s ruling in Stoneridge v. Scientific Atlanta. On Thursday, Sen. Specter (D-PA) urged his colleagues cosponsoring the amendment to come to the Senate floor in support of it, but according to the Congressional Record, none did. The Senate is expected to vote on amendments this evening, but it seems safe to say the Specter amendment will not be considered until after the results of the Pennsylvania primary election on Tuesday. If Senate Majority Leader Reid files cloture on the entire 1,400-page bill today, as reported, then the Stoneridge amendment may be stone dead. That would be good.
Free-market and conservative think tanks have joined a letter objecting to the financial regulation bill, S.3217, Restoring American Financial Stability Act of 2010.
John Berlau of the Competitive Enterprise Institute posts about and reprints the letter at National Review’s The Corner, “Dodd Bill: Bailouts, Taxes, and Overregulation.” This paragraph from the letter is worthy of note:
“Proxy access” and corporate governance provisions would take power from states and empower progressive interest groups — from unions to animal rights: Even though they have little justification in preventing the next financial crisis, the bill contains “proxy access” provisions that would empower union pension funds and other progressives by forcing companies to fund their Saul Alinsky-style campaigns for a company’s board of directors. Combined with other items federalizing incorporation law — like a mandated majority instead of plurality standard for director votes — this could enable special interest activists to harm the interests of ordinary shareholders and encourage corporate directors to cut deals with them on things like card check, cap-and-trade, and kicking conservative media personalities off the air.
In the category of “news to us,” the Wall Street Journal reports, “Shareholders Ponder North Dakota Law“:
A new front in the battle over corporate governance is emerging in an unlikely place: North Dakota.
Only two publicly traded companies are incorporated in North Dakota. But last year lawmakers there — prodded by out-of-state activists including Carl Icahn — enacted the nation’s most shareholder-friendly corporate-governance law.The law prescribes rules that companies incorporating in North Dakota can adopt as a package, including requiring an annual shareholder advisory vote on executive pay and the naming of a chairman who isn’t an executive. The rules also provide for the annual election of directors and make it easier for shareholders to nominate their own director candidates.