Moderator: Edwin S. Maynard, partner, Paul, Weiss, Rifkind, Wharton & Garrison LLP Panel: joined by Paul Atkins, SEC commissioner 2002-2008; Richard Roberts, SEC commissioner 1990-1995; Annette Nazareth, SEC commissioner 2005-2008; and Brian Breheny, deputy director for legal and regulatory policy, Division of Corporation Finance, SEC
Let it be said that Brian Breheny is a good sport. He gamely agreed to present his own view of the agency’s recharged agenda under Chairman Mary Schapiro before being questioned by the panel of former SEC commissioners. In introductory remarks, Breheny implored directors to engage shareholders and not be fettered by Regulation FD, which he said, “was never intended to stand in the way of those conversations. Are people using the regulation as an excuse? Are you okay with that?”
To open the panel discussion, Edwin S. Maynard asked for reaction to what was then proposed financial reform legislation. What’s being promulgated is what Paul Atkins called a “trade union agenda” and the federalization of governance initiatives such as say on pay, majority voting, clawbacks of executive compensation and proxy access that are best left to the discretion of the states. Atkins warned that increased regulation could thwart the creation of jobs by constraining investors. “Will we finally reach the straw that breaks the camel’s back with respect to public markets, where it’s just completely unattractive to become a public company anymore, or it’s cheaper and easier to go elsewhere to raise funds?”
The best hope, said Annette Nazareth, is “that we end up with legislative provisions that are not so prescriptive that they can be dialed up or down by regulators through notice and comment rulemaking. Frankly, if you look at some of these provisions and you reverse engineer where some of the banks are today, about two thirds of them would not be in compliance. So that’s a real problem. We have to hope that through the conference process that some rationality prevails.”
“Everyone now knows the SEC and that has made the environment more difficult for directors,” Richard Roberts said. “When I worked at the SEC–and I’m from Alabama, originally–nobody knew who the SEC was. Now, everybody knows who the SEC is, and it’s not necessarily a good thing…but that’s the environment that we’re all in. Directors are thrown into that environment, too. So folks know who you are. Your responsibilities are going to be much more difficult.”
Part of that changed environment relates to proxy advisors. In response to a question from the audience, Breheny said that the SEC intends early next year to issue its study and concept release on proxy advisory services and whether they should be further regulated: “We can disagree on the role that people play and the cost and how the process is working, but I really do hope that when it gets out that we’ll have at least educated everybody so we can focus on the issues.”