The wave of corporate accounting scandals that swept this country and shook investor confidence required strong corrective measures. With landmark legislation like the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress significantly improved corporate governance. We must continue to work to restore investor confidence and strengthen our markets, which are the deepest and most liquid in the world. As a representative of the market center of the world, I take this responsibility very seriously.
As companies come into compliance with new and evolving accounting standards as prescribed in both Dodd-Frank and Sarbanes-Oxley, it is important to note the key bill provisions that have protected investors and consumers alike.
- Shareholders now have a say on executive pay and golden parachutes, holding executives accountable;
- The Securities and Exchange Commission (SEC) now has the authority to grant shareholders proxy access to nominate directors and required directors to win by majority votes in uncontested elections, shifting their focus from short-term profits to long term growth;
- Public companies are now required to take back executive compensation if it was based on inaccurate financial statements that don’t comply with accounting standards;
- The SEC must clarify disclosures relating to compensation, including requiring companies to provide charts that compare their executive compensation with stock performance over a five-year period; and
- The Federal financial institutions regulators must now issue and enforce joint compensation rules for the financial institutions they regulate.
It has become clear that the need for compliance in the aftermath of the most recent credit crisis has to be met, but we must be careful not to inadvertently burden smaller companies. Keeping this in mind, I am concerned however that creating too many sweeping exemptions from both Sarbanes-Oxley and Dodd-Frank, as some have proposed, could undermine these significant accomplishments and may damage investor confidence and the markets in the long run.
I have consistently supported transparency as a means to achieve investor confidence and unmask abuse. In the 108th Congress, I led the fight in the House in support of a proposed SEC rule and against "phony accounting" legislation that would have required companies to show as an expense in public filings only stock options granted to the top five executives, while not counting all other stock options as an expense. I was proud to receive letters supporting my position from financial luminaries such as Arthur Levitt, Warren Buffet, and John Bogle, among others, and my position was also supported in testimony by then SEC Chairman William Donaldson and then Federal Reserve Chairman Alan Greenspan. The rule has now become regulation and has caused the disclosure of significant abuses of stock options, including illegal backdating.
07/21/10 - H.R.4173. Dodd-Frank Wall Street Reform and Consumer Protection Act. (PL 111-2030)