Archive

Posts Tagged ‘SEC’
October 8th, 2013 at 4:24 pm
Federal Overregulation Is Killing U.S. Public Markets
Posted by Print

Recently, CFIF highlighted the threat to markets and the U.S. economy posed by Dodd-Frank and overzealous Obama Administration regulators.  Specifically, the Securities and Exchange Commission (SEC) proposed a new regulation last month requiring public companies to tediously calculate their employees’ income ratios for exploitation by political activists.  Current laws already require public companies to post executive compensation levels, and the proposed rule would only encourage more overseas outsourcing, since foreign employees would likely be excluded.

Importantly, we noted that the SEC’s proposed regulation would also push even more companies to go private rather than public, thus depriving everyday investors the opportunity to participate in markets.  In other words, this little class warfare tactic would paradoxically end up hurting middle-class and poorer Americans while benefiting wealthier Americans who are able to participate in private company investment.  On that topic, in today’s Wall Street Journal Edward S. Knight illustrates the problem we face:

The number of publicly traded companies listed on U.S. exchanges has steadily declined to 5,000 this year from around 8,000 in 1995.  There are a number of reasons, but no one doubts that going and staying public has become increasingly more expensive, time-consuming and distracting for management.  As a result, businesses have sought other ways to organize and finance themselves.

This is not a healthy trend.  Private companies that need to grow can raise capital efficiently in U.S. public markets.  And robust public markets provide wide opportunities for individual and institutional investors to grow wealth.”

Clearly, federal overregulation comes at great cost, whether via Sarbanes-Oxley, Dodd-Frank or SEC executive compensation micromanagement.  Until we put an end to it, those costs will only increase for American markets and citizens alike.

September 20th, 2013 at 11:45 am
Federal Regulators Make Move to Micromanage Company Pay
Posted by Print

Last week, we highlighted the latest in a long line of Dodd-Frank debacles.  Specifically, a federal court unceremoniously vacated a regulation forcing U.S. energy companies working abroad to disclose sensitive proprietary information to foreign competitors who aren’t subject to the same rule.  As we noted, federal bureaucrats were essentially trying to force domestic companies to surrender their playbooks to overseas rivals in the name of worldwide social engineering.

This week, we’re witnessing yet another Dodd-Frank infamy.

On Wednesday, a sharply divided Securities and Exchange Commission (SEC) proposed a controversial regulation that would require companies to tediously calculate compensation ratios between chief executives and employees for public scrutiny.  Keep in mind that public companies are already required to disclose compensation of top executives, so the proposed new rule won’t provide any useful information about a given company’s financial stability.  Rather, it is nothing more than a sop to activists who obsess over distribution of wealth and who seek to pressure businesses and executives.

To what end?  What business is it of the federal government how private companies choose to compensate every single one of their employees?  Why should companies’ time and resources be wastefully diverted to calculating ratios simply to please Washington, D.C. bureaucrats?  How will this help “protect” investors?  The simple answer is that it won’t.  Instead, it’s a provision sought by anti-corporate activists to foment discord and wage class warfare.

Moreover, the proposed rule may drive subject companies to shift even more workers overseas rather than here in the U.S., since foreign employees may be excluded from the burdensome calculations.  The proposed rule will also incentivize companies to remain or become private, rather than public, in order to escape these pointless burdens.  In turn, that would only serve to punish middle-class investors who don’t possess the wealth to participate in private investment.

While the SEC’s proposed pay ratio disclosure rule has yet to be implemented, the issue of executive compensation has also surfaced in the ongoing American Airlines bankruptcy.  This week, in U.S. Bankruptcy Court, Judge Sean Lane rejected the compensation package American Airlines’ creditors had approved for the airline’s CEO Tom Horton.  Largely due to the work of Horton and his management team, American’s performance in bankruptcy has exceeded all expectations — the company has experienced an almost total turnaround.  Furthermore, Horton’s compensation package is in line with industry standards.  Executives whose airlines fared far worse in bankruptcy than American received their compensation packages with little to no opposition.

An individual’s compensation at a corporation is a matter that should be decided by its leadership, board, and investors.  The government has no business intervening and micromanaging company pay, whether at American Airlines or all of the other U.S. public companies now moving within its sights.

February 23rd, 2012 at 5:01 pm
Dodd-Frank’s Quiet Regulatory Assault on American Energy
Posted by Print

Dodd-Frank, the monstrous financial “reform” legislation enacted two years ago, contains hundreds of byzantine provisions targeting banks, mortgage lenders, and traders on Wall Street.  All of those new rules and regulations have been contested from both sides of the political aisle, and regulators have requested additional time to even understand its requirements.  There’s one little-known provision, however, that was snuck into Dodd-Frank at the last minute and should alarm everyone, regardless of political point of view.  Namely, new payment disclosure rules for American oil, gas, and mining companies that instantly threaten our nation’s energy security.

Typical of the current trend in Washington, Congress has tasked a regulatory agency, the Securities and Exchange Commission (SEC), to carry out this mandate. The new regulation, formally called “Disclosure of Payments by Resource Extraction Issuers,” is found in Title XV, Section 1504 of the bill. Put simply, the rule would require that any company listed with the SEC and engaging in energy production overseas must disclose literally every single payment made to a foreign government.

The rule would create a competitive disadvantage for American energy producers because not only would state-owned companies such as those in Iran and Venezuela be exempted, they would also suddenly possess detailed knowledge down to individual wells and projects.

Senator Ben Cardin (D – Maryland), one of the champions of this provision, has curiously argued that “it’s appropriate to require companies to provide project-level information…” According to him, specific, sensitive financial – even proprietary – data on particular drilling projects should potentially be surrendered, including to those countries or companies who don’t share America’s intentions.

Pete Sepp at the National Taxpayers Union recently explained the problem well:

“…Here is the painful rub with Section 1504: In essence, the rule would give foreign competitors—largely state-owned oil and gas firms—access to information about what American companies are paying to governments overseas, enabling them to outbid and outmaneuver in the global race for energy resources.”

That means that energy firms controlled by the Iranians and the Chinese would receive a huge helping hand compliments of the SEC, one that would severely undercut the international competitiveness of American companies. What’s more, the state-run energy firms that would benefit from the SEC’s new payment disclosure rule already maintain a large advantage over our domestic producers – not only financial backing from their home governments, but also ownership of the lion’s share of proven oil and gas reserves worldwide.   (According to The Wall Street Journal, state-run companies now control more than 75 percent of global oil production.)

And, quite simply, after the rejection of the Keystone XL pipeline and renewed calls for new tax hikes on American oil and gas companies, this new SEC regulation would deal yet another blow to an industry that is essential to our economic recovery. Why then would Congress and the SEC side with petro-dictators over American motorists and manufacturers?

An alternative would be for the SEC to implement a payment disclosure rule on a country-by-country basis, which could help protect American companies’ interests in specific projects abroad.  Or, preferably, Congress could reconsider that section of Dodd-Frank altogether.  Recall that Capitol Hill spent significant time more than 30 years ago hashing out the Foreign Corrupt Practices Act, which already specifically addresses  the transparency and payment issues at hand in Section 1504. For the sake of American future energy and economic security, our chief securities regulator must keep America’s interests first – not Russia’s or Iran’s or Venezuela’s.

April 23rd, 2010 at 9:45 am
SEC Porn Surfers: This Is Whom Obama Wants Running More of Our Economy
Posted by Print

An addendum to our Liberty Update commentary piece this week, which highlights the absurdity of Obama advocating greater power for government and the Securities and Exchange Commission (SEC) over the American economy.

We noted in our commentary that the latest Pew Research poll shows an American electorate increasingly distrustful of government since Obama entered the White House.  We also noted that the SEC’s recent record of utter incompetence in stopping Ponzi schemes like that of Bernie Madoff, as well as its inability to foresee or prevent the latest economic bubble, suggest that the last thing the struggling American economy needs is even more centralized government control.

We couldn’t have timed our commentary more perfectly, as America wakes up this morning to the news that SEC personnel were wasting thousands upon thousands of hours surfing for pornography rather than actually doing the job that our tax dollars pay them to do.  As one example, an SEC accountant attempted to access a blocked porn site 16,000 times, and many of the SEC staffs’ actions occurred even after the financial bubble burst.

Yet Obama, the man with such paltry private-sector experience or knowledge, sanctimoniously lectures us that he and the SEC should be granted even more authority?