SEC’s Schapiro on exec pay
Mary L. Schapiro has been in the job just a few months, but the Obama administration’s new top securities regulator already is pursuing an aggressive agenda that blends souped-up enforcement with new rules designed to give investors more power and advisors more responsibility.
Schapiro, who was chosen late last year to head the Securities and Exchange Commission, last week made several proposals aimed at giving shareholders more say in how companies are run. Her proxy-access proposal would give shareholders the right to nominate candidates to a company’s board, a right long sought by activist shareholders. She is also supporting an NYSE proposal that would block brokers from secretly voting client shares.
Shapiro recently agreed to an online interview, in which she answered questions about these proposals and the recent clamor to restrict executive pay.
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There are proposals in Congress and TARP that would restrict executive pay. Is that something that’s coming for the market at large?
I am concerned that executive compensation has, for a number of years, become disconnected from actual long-term company performance. I worry that the structure of compensation has driven executives to make decisions that have significantly increased company risk -- without a full understanding by either shareholders or boards of the impact of additional risk on the company’s long-term financial condition. While issues recently have been most pronounced in the financial services industry, they appear throughout the market.
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At what point does pay go from being an inside-baseball corporate decision to becoming a wider shareholder concern?
We are way past that point. Shareholders across America are concerned with large corporate bonuses in situations in which they, as the company’s owners, have seen declining performance. Many shareholders have asked Congress for the right to voice their concerns about compensation through an advisory “say on pay.” Congress provided this right to shareholders in companies that received TARP funds, and I believe shareholders of all companies in the U.S. markets deserve this same right.
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What is proxy access?
Proxy access refers to the right of shareholders to submit board of director candidates to the company and have those candidates included in the proxy materials that the company distributes.
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Similar proposals have been launched in the past but have always been shot down largely because of business opposition. Do you think it will be different this time?
I’m looking forward to a robust public debate of our proposal, once it is released. I don’t want to prejudge how anyone will react to the proposal.
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Many investors say they’re disillusioned with the stock market, believing both Wall Street and Main Street to be corrupt. Is this a concern for the SEC?
The SEC is the only federal agency whose primary function is protecting investors’ interests. We take this charge seriously and are committed to restoring investors’ confidence in the integrity and fundamental fairness of the U.S. markets.
By reinvigorating the SEC and enhancing our enforcement efforts, I believe we can help to restore investor confidence. Already since I’ve been at the agency, we have streamlined our enforcement procedures for initiating investigations, begun the process of hiring new skill sets to keep pace with the financial products of the day, and created an active agenda to propose new rules that would fill the regulatory gaps that came to light as a result of the financial crisis.
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