On Monday, the Senate Banking Committee approved a comprehensive financial reform bill that includes mandates for “say on pay” votes and majority voting in board elections, as well as authorization for the SEC to adopt a proxy access rule.
The committee voted along party-lines, 13-10, to send Senator Christopher Dodd’s 1,336-page reform bill to the Senate floor. None of the panel’s Republicans supported the legislation.
According to news reports, the Republicans decided not to delay consideration of the bill by offering various amendments during Monday’s committee markup, and plan instead to seek changes before a floor vote. While Dodd’s fellow Democrats hold a majority in the full Senate, they will need to enlist some Republican support to head off a potential filibuster on the floor.
The Senate bill would bolster the resources of the SEC while giving the government new authority to dismantle financial institutions that are deemed “too big to fail.” The legislation also would impose new regulation over derivatives and hedge funds, while creating a new consumer protection bureau within the Federal Reserve.
The House of Representatives approved a narrower financial bill in December that includes a requirement for annual “say on pay” advisory votes and authorization for proxy access.
The California Public Employees’ Retirement System and the Council of Institutional Investors are among those that are rallying support for Dodd’s bill.
“The American public and investors have . . . suffered trillions of dollars in investment losses. The confidence in the integrity of our markets has been undermined,” Ann Yerger, executive director of the Council of Institutional Investors, said at a March 19 press conference. “It is time for our leaders to act on this long overdue bill. It’s sensible and is in line with global standards.”
The press conference included Ira Millstein, a long-time lawyer for companies and associate dean for corporate governance at Yale University, who defended the bill’s authorization for an access rule. “Don’t be fearful that the legislation will lead to an SEC proxy access proposal that would upset board cohesion and lead to ‘bomb throwers’ populating the board room,” Millstein said. “The job of the SEC is to monitor this process and it has demonstrated caution and reflection.”
Richard Breeden, a former SEC chairman who now serves as an investment manager and a corporate director, said the bill will help improve board accountability. “Do remember that a common element in the failure of Lehman Brothers, AIG, Fannie Mae, and other firms was that their boards of directors did not control excessive risk-taking, did not prevent compensation systems from encouraging a ‘bet the ranch’ mentality, and did not hold management sufficiently accountable. When boards failed to do their jobs of overseeing risk taking and encouraging sustainable performance, investors and taxpayers both suffered enormously,” Breeden said during the press conference.