Christopher Cox brought a sense of calm to the Securities and Exchange Commission after he became chairman. Rather than the split, partisan votes that had become the standard under the previous chairman, Mr. Cox has appeared to look for the widest support possible. Under Mr. Cox, every vote made on a proposed rule has led to a 5-0 decision.
Now, however, critics say that they are frustrated with Cox’s approach. They say that because Mr. Cox is constantly working toward consensus, the SEC may be progressing too slowly on certain key issues and that investors and Wall Street have ended up having no guidance on these topics.
This debate regarding Mr. Cox touches the core of some big questions regarding the role of an SEC chairman. A large question to consider is whether Mr. Cox should aim for changes that are contentious, even though they put off interest groups and colleagues, or whether he should generate less decisions that are unanimous but lasting.
Issues that still have no resolution include the creation of a policy regarding penalties against companies that do not correctly backdate stock options, changing the most controversial parts of the 2002 Sarbanes-Oxley law on corporate accountability, handling mutual-fund governance, and deciding whether shareholders should put their own election-related proposals on corporate ballots.
Mr. Cox’s supporters say that unanimous decisions lead to better rules, especially as decisions that are not unanimous are usually challenged and overturned. Some of his critics, however, say that big changes require outvoting the opposition and possibly offending people.
A big test of Mr. Cox’s consensus approach is the issue of whether or not shareholder should be allowed to place their own election-related proposals on corporate ballots. This could end up in shareholders nominating their director candidates and could increase the influence of shareholders.
Mr. Cox says a final vote on this issue will take place this year. This issue could be especially controversial, because it does not appear that there is room for compromise. While shareholder activists want this idea to push through, business groups are against the move.
One possible solution to this issue is to offer a compromise solution. The SEC is examining whether companies can resolve disputes with shareholders through arbitration instead of the court system. This could satisfy SEC Republicans and the SEC could offer them this option while offering Democrats the changes to the way that directors are nominated. The downside to this solution, however, is that both sides could end up alienated by it. Some people believe that this issue has no room for compromise, while others believe that giving shareholders nomination rights could lead to political battles involving special interest groups.
This matter has been an issue since 2003. Because of its controversial nature, however, it never became a formal rule and the issue lay unaddressed until last September when a federal appeals court said that the SEC needed to get clear on its stance. Mr. Cox promised to respond quickly, but the SEC has postponed making a proposal on more than one occasion.
Mr. Cox is the SEC’s 28th Chairman and has been in office since August 3, 2005. Since his tenure, Mr. Cox has made SEC enforcement the agency’s priority, and he has brought cases against stock options backdating, hedge fund insider trading, fraud against senior investors, online securities scams, and municipal securities fraud. He intends to leave the SEC after the next presidential election.
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