States Urge Faster Wall St. Reform
California Treasurer Phil Angelides and chief investment officers of six other states -- representing nearly $500 billion in public pension assets -- said Monday that they want regulators to move more quickly to reform securities laws and enhance shareholder rights.
The Securities and Exchange Commission on Monday approved new stock exchange rules designed to provide more shareholder control over certain executive compensation arrangements -- one of four key issues on which big institutional investors have lobbied.
The state officials acknowledged the SEC action as a good first step. However, they said, three other big issues remain unresolved.
The officials said the SEC must act on the ability of shareholders to nominate directors to corporate boards; it should bar brokers from voting proxies for shareholders without the shareholders’ express permission; and company auditors should be prohibited from providing lucrative tax consulting work to their audit clients.
“We are deeply concerned that unless we keep shining light on these areas of shareholder concern, they will be put on the back burner,” Angelides said at a Sacramento news conference. “We expect rapid and decisive action.”
Under current securities laws, shareholders who want to nominate a director without management support must launch a lengthy and, often, expensive proxy battle. That gives management a built-in advantage in pushing its candidates for board seats.
Broker voting on issues related to executive pay was banned by the SEC on Monday as part of new listing requirements for the New York Stock Exchange and Nasdaq. The new rules also require shareholder approval of all stock-based compensation plans.
Brokers, who typically vote with management, are still allowed to vote client shares to elect directors and ratify auditors, however.
“It’s akin to ballot-stuffing by management,” Angelides complained.
Although the Sarbanes-Oxley Act of 2002 requires the SEC to tighten rules on accountants to avoid conflicts of interest, the agency has allowed companies to hire their auditing firms to do tax consulting.
That creates a conflict because these firms recommend tax shelters and then rule on the shelter’s ability to pass accounting muster, Angelides said. This apparent conflict of interest has already drawn the attention of the Pubic Company Accounting Oversight Board, but SEC rules are needed to make the issue clear.
SEC officials said that many of the issues in the state officials’ hit list were already under discussion, with some -- including the shareholder nomination process -- in early stages of regulation. But agency officials could not comment on how soon the agency might act or what it might do.
The band of state officials is composed of state treasurers and investment officers who serve as trustees of public pension funds that invest the assets of state employees such as teachers, police officers and firefighters in California, New York, Connecticut, Kentucky, Oregon, Maine and North Carolina.
