In her speech earlier this month at the Transatlantic Corporate Governance Dialogue – 2009 Conference, SEC Chairwoman Mary Shapiro addressed a number of factors that precipitated the current financial crisis. For one thing, she identified a failure of corporate governance as being of central concern. “In particular,” she said, “boards of directors did not thoroughly question the decisions of senior management to take on risks. Of equal concern, boards often appeared to misunderstand the gravity of risks taken. Senior management took higher returns at face value, without questioning why such higher returns were possible for supposedly safe investments and strategies.”
Ms. Shapiro promised the conference that the SEC is committed to taking a more active role both in corporate governance and in financial industry oversight. With respect to the latter, she said, better policing of unfair trading practices, including abusive short selling, is of primary importance. Ms. Shapiro also stated that the SEC is in the process of implementing new regulations to govern credit rating agencies and investment advisers – two of the less visible players that contributed significantly to last year’s market collapse. Increasing board oversight of management, working to enhance the strength and integrity of investment products, and improving market transparency are other items at the top of the SEC’s agenda.
We applaud the Chairwoman’s ambition, and we hope that the Commission’s goals come to fruition. It seems like this sort of multi-pronged approach stands the greatest chance of curing what ails our financial markets.
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