Regime Change and Corporate Governance

Regime change has arrived.  The Democrats have taken the White House and increased their margins in the House and Senate.  What impact will it have for the corporate governance debate? 

It's unlikely to be a high priority in the short term (although economic reform and reform of the financial markets might be).  Nonetheless, the change in administration is likely to have a profound impact on the debate.

First, Barack Obama has indicated sympathy with some of the issues promoted by shareholders.  He has introduced a bill on Say on Pay in the Senate.  (Shareholder Vote on Executive Compensation Act - S. 1181).  The election will presumably provide new impetus for the legislation.  It has already passed in the House.

Second, Obama will get to appoint a new chairman of the SEC.  Currently, the position is held by Chris Cox, a former Republican congressman.  The president gets to appoint the chairman.  Cox has a seat on the Commission until June 2009 but has indicated that he will step down when the Bush administration expires.  According to one post, Andrew Cuomo and Elisse Walters are names currently being discussed.  Harvey J. Goldschmid is another possibility and has strong support among the unions.  In any event, the choice will likely result in a more pro active, pro shareholder stance for the Commission.  Access will likely return to the top of the agenda.

Third, Obama will appoint a new Secretary of the Treasury.  Some have been bantering around the name of Lawrence Summers, the former Secretary under President Clinton, and Jon Corzine from New Jersey.  Whomever is appointed, he or she will likely take a firmer stance on the enforcement of the executive compensation provisions in the Bailout Bill and will be less likely to take positions designed to damage the interests of shareholders.  It was, after all, Treasury that led the fight to narrow the scope of Rule 10b-5 in Stoneridge and ultimately succeeded in prevailing upon the Solicitor General to file a brief opposing the extension of the antifraud provision to vendors.

We will have further thoughts as the days progress but the interests of shareholders are likely to receive a higher priority with the new administration.

Comments

[Anon]

Don't discount Leo Strine! Maybe not as chairman, but certainly as a commission. He's a big democrat (see recent article in The Deal), and I hear that Biden knows him :)