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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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February 25, 2008 12:01 AM ET
Mr. Cox, whose term officially expires in June of next year, is viewed by many as a slightly right- of-center chairman with excellent political skills. Inheriting an SEC fraught with ideological infighting, the nine-term congressman from California positioned himself as a middle-of-the-road bureaucrat who could tackle controversial issues with broad congressional support. Yet despite a slew of unanimous commission votes and recent statements that the SEC will pursue “an ambitious agenda” this year, Mr. Cox has failed to resolve a number of important issues, such as proxy access, and avoided other controversial topics. Further, the worsening credit crisis and the current lack of Democrats on the commission—all amid a heated presidential race—may stymie any chances for much change going forward, experts say. “I think he'll be regarded as a well-meaning and generally moderate chairman...but not an important reformer,” said John Coffee, a law professor at Columbia University. “He was not really able to realize his agenda. Now he is surrounded by two Republican commissioners who appear to be more ideological and less pragmatic than he is.” Major reform may not have been in the cards for Mr. Cox, who was appointed during President Bush's sixth year in office, a “particularly hard time to be groundbreaking and reformatory,” said Joel Seligman, president of the University of Rochester and the author of several books on securities regulation. “It's easier [in that case] to make incremental changes.” Instead of tackling thorny issues and tanning Wall Street's hide, Mr. Cox is pushing for modernization of financial statements and a plain-English rewrite of mutual fund disclosures. He also has spurred convergence with international accounting standards and streamlined broker-dealer regulation. His political skills helped him adopt this agenda, sidestep congressional scrutiny and avoid the pitfalls of predecessors William Donaldson and Harvey Pitt. “[Mr.] Cox is without a doubt the most politically savvy chairman they've had at the SEC for a long, long time,” said Robert Monks, the veteran corporate governance activist. “He put up issues on which he knew he could get 5-0 votes.” Political acumen couldn't save Mr. Cox's attempt to solve the proxy-access dilemma, though, an issue that had plagued other SEC chairmen. In 2006, a court ruling stated the commission could not indiscriminately allow companies to strike down shareholder bylaw proposals to nominate their own directors. Mr. Cox tackled the issue, promising to reach a solution with enough support to pass. He didn't have the votes, though. The SEC's two proxy-access proposals last year—one expanding shareholder access, one restricting it—fractured the once-unanimous commission. The SEC voted 3-1 to limit proxy access, three months after Democratic commissioner Roel Campos left the agency. Annette Nazareth, at the time the only Democrat on the commission, voted against the proposal but also voiced opposition to the so-called “greater access” proposal. “He's had the Tom Brady chairmanship,” said Patrick McGurn, special counsel at RiskMetrics. Mr. Cox was somewhat of an advocate for investors in the beginning of his term, pursuing executive compensation rules and option backdating enforcement, Mr. McGurn explained. But he eventually lost sight of that goal and “failed to win the big game” when addressing proxy access, he said. “They had their shot, and at the end of the day they ended up punting.” Many, including House Financial Services Committee chairman Barney Frank (D-Mass.) and AFL-CIO general counsel Damon Silvers, have said the SEC should not proceed on proxy access until it has five commissioners. Republican commissioner Paul Atkins said in an interview that the 3-1 vote should have settled the issue. “We already addressed it,” he said. Fellow commissioner Kathleen Casey reportedly said last week that the SEC should take its time in revisiting proxy access. A shrewd sense of politics also forced Mr. Cox to backpedal somewhat on Sarbanes-Oxley compliance. Following a spate of industry cost-benefit analyses, the SEC last spring pushed for a rewrite of the act's Section 404(b), which mandates auditor attestations of internal controls. The new audit standard, and company guidance published later in the year, allowed companies to review only the medium- and high-risk areas of their financials. Then, following an outcry from business groups and lawmakers, Mr. Cox decided to allow small-cap companies one more year to comply with Section 404(b). Democratic commissioner Annette Nazareth voted for the delay before she left office. Previously, Mr. Cox and others at the SEC had stated publicly they were leaning against postponing the 2009 deadline for the auditing section, but several hearings seemed to have changed his opinion. Indeed, he recently told the Senate Banking Committee that he “tried to slay the 404 beast.” In many cases, Mr. Cox's desire to appease multiple groups has led to rules that satisfy both pro-business and pro-shareholder groups. “He's been quite striking in his moderation,” Mr. Seligman said. “I have been impressed by his thoughtfulness.” Mr. Cox declined to be interviewed for this story. Mr. Cox's pro-business street cred certainly holds up. “He's gone out of his way to be open and accessible to everybody,” said Tom Lehner, director of public policy at the Business Roundtable. Rep. Vito Fossella (R-N.Y.), an occasional critic of the SEC's inspections and enforcement programs, said Mr. Cox has done “a very good job” on enforcement efforts and points to the SEC's global efforts to bring U.S. and foreign regulations more in line with each other. Mr. Cox also decided to drop previous SEC rules to require mutual fund director independence and hedge fund registration, pacifying Wall Street concerns about the agency's regulatory agenda. Both rules had led to 3-2 votes under Mr. Donaldson's tenure and lawsuits against the SEC. But now worries abound over whether regulation at the SEC will peter out, especially if the commission has no Democrats on it. The Senate and White House have been locked in a battle over nominations, including Democratic SEC nominees Luis Aguilar and Elisse Walter. Both nominees enjoyed support from most members of the banking committee, and their names were submitted to the White House in November. The SEC has been shorthanded before. In 2002, two Republican nominees were held up by the banking committee until two Democratic nominees were named. At one point in the 1990s, the SEC operated with only two commissioners, both of them Democrats. Without Democrats, Mr. Atkins could play a very influential role and hold up further rule-making. Ms.Casey, who has caught some SEC-watchers by surprise with her consistently libertarian voting streak, also could oppose major changes. And pro-business special interests are ready to put a stranglehold on the SEC via appropriations, some say. In an October 2007 letter to Senate Majority Leader Harry Reid (D-Nev.), Mr. Monks—a self-described life-long Republican—wrote that the SEC has “shown a propensity to swing toward Wall Street interests, making these vacancies of even greater significance than usual.” He added that if the SEC vacancies are filled by commissioners “beholden to Wall Street” then the new administration will not be able to reform U.S. corporations. “There is an old axiom that says the SEC doesn't prevent you from being a fool, but it does prevent others from making a fool out of you,” Mr. Monks wrote. “But perhaps for not much longer.” Former SEC chairman Harvey Pitt said there's no reason for the SEC to become a lame duck, adding that the agency under Mr. Cox has been particularly active on a number of issues. According to Mr. Pitt, the political pressures on the SEC will not hinder Mr. Cox from achieving most of his agenda. “If anybody can do it, he can.” FW
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