The SEC's Christopher Cox on Executive Pay and More
Since taking charge of the Securities and Exchange Commission nearly two years ago, Chairman Christopher Cox has rung up a string of regulatory victories, confounding some critics who thought he'd go lax on corporate accountability. Senior Writer Kit R. Roane talked with Cox recently about his history, what he's learned, and what he wants to accomplish next. Excerpts follow.
What is your proudest achievement so far at the SEC?
Without question, it is our dramatic reforms in the disclosure of executive compensation. When I came to the commission, there was a good deal of complaint about the lack of clear disclosure of how much the boss makes. But despite all the talk, nobody was doing anything about it.
Beginning this year, shareholders will receive dramatically more information and in far clearer fashion about executive pay than they ever have had before. As you know, that will include the distillation of all forms of compensation into one number. It used to be that shareholders had to hunt through financial statements, footnotes, proxy statements, and disclosure documents, and even in that they might not find it particularly easy.
What is the greatest challenge going forward?
Maintaining America's high standards in this era of global securities markets is one of our greatest challenges. The New York Stock Exchange is combining with Euronext and forming alliances with overseas exchanges, such as in Japan. The Nasdaq has bought a 25 percent share of the London exchange. Other markets around the world are looking to consolidate.
At the same time, retail investors in America are being exposed, for the first time, to opportunities to directly purchase foreign securities. Technology is bringing the whole world closer together and faster than anybody would have imagined just 10 years ago. There is no question where the market is headed. But securities regulations in the 21st century have to be sturdy enough to protect American investors and our markets, in the midst of truly international forces. Our capital markets are an extraordinary resource, and protecting them means protecting our national savings, the engine of job creation and the lifeblood of our economy.
Is U.S. market regulation harming our competitiveness?
No, but we need to keep pace with change. The SEC has been successful throughout its history by constantly changing in response to the changing marketplace. Without question, both technologically and commercially, the markets are in a state of rapid flux. Regulation has to keep apace with that, but that is very different than saying that there is overregulation.
Some of the SEC's recent moves have concerned shareholder advocates. One in particular is your decision to weigh in on an important Supreme Court case (known as Tellabs), arguing that shareholders in the case needed to pass a higher hurdle in bringing lawsuits under the 1995 Shareholder Litigation Reform Act, a law you helped pass.
We have sided with the largest number of courts that have interpreted the law. The law provides important protections for shareholders against unscrupulous lawyers. Private lawyers, unlike the SEC, have a financial stake in the outcome of litigation, which raises conflicts of interest that the SEC must police. In Tellabs, we argued against an expansive reading of the statute that would have, in effect, repealed a key protection for shareholders.
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