Posts Tagged ‘Accountability’

Perspectives on Strengthening Enforcement

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Wednesday April 2, 2014 at 9:02 am
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Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s remarks to the Annual Forum of the Australian Securities and Investments Commission (ASIC), available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Greg [Tanzer, ASIC Commissioner] suggested that I talk about my perspectives on international cooperation in the enforcement context, as well as what we at the SEC are doing to try to make our own enforcement program even more robust and responsive to the issues presented by interconnected and fast moving markets. I am happy to do that. But, before I do, I would like to share a couple of thoughts on the topic of your first session—“Enforcement—does the punishment fit the crime?”

Much of my professional background has been in enforcement and strong enforcement was one of my primary focuses when I became Chair of the SEC almost a year ago and it remains so. Vigorous enforcement of the securities laws in the United States, in Australia and around the world is obviously a critical component of our investor protection mission.

…continue reading: Perspectives on Strengthening Enforcement

Too-Big-To-Fail Banks Not Guilty As Not Charged

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday March 28, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Nizan Geslevich Packin of the University of Pennsylvania Law School; Zicklin School of Business, Baruch College, City University of New York.

In the paper, Breaking Bad? Too-Big-To-Fail Banks Not Guilty As Not Charged, forthcoming in the Washington University Law Review, Vol. 91, No. 4, 2014, I focus on the benefits that the largest financial institutions receive because they are too-big-to-fail. Since the 2008 financial crisis, rating agencies, regulators, global organizations, and academics have argued that large banks receive significant competitive advantages because the market still perceives them as likely to be saved in a future financial crisis. The most significant advantage is a government implicit subsidy, which stems from this market perception and enables the largest banks to borrow at lower interest rates. And while government subsidies were the subject of a November 2013 Government Accounting Office report, in the paper I focus on a specific aspect of the benefits the largest banks receive: the economic advantages resulting from exempting the largest financial institutions from criminal statutes. I argue that this exemption—which has been widely discussed in the media over the last few years, following several scandals involving large financial institutions—not only contributes to the subsidies’ economic value, but also creates incentives for unethical and even criminal activity.

…continue reading: Too-Big-To-Fail Banks Not Guilty As Not Charged

Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It”

Posted by Benjamin W. Heineman, Jr., Harvard Law School Program on Corporate Governance and Harvard Kennedy School of Government, on Thursday March 20, 2014 at 3:57 pm
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Editor’s Note: Ben W. Heineman, Jr. is a former GE senior vice president for law and public affairs and a senior fellow at Harvard University’s schools of law and government. This post is based on an article that appeared in the Harvard Business Review online, which is available here.

Delay in confronting crises is deadly. Corporate leaders must have processes for learning of important safety issues. Then they must seize control immediately and lead a systematic response. Crisis management is the ultimate stress test for the CEO and other top leaders of companies. The mantra for all leaders in crisis management must be: “It is our problem the moment we hear about it. We will be judged from that instant forward for everything we do—and don’t do.”

These are key lessons for leaders in all types of businesses from the front page stories about Toyota’s and GM’s separate, lengthy delays in responding promptly and fully to reports of deadly accidents possibly linked to product defects.

The news focus has been on regulatory investigations and enforcement relating to each company, but the ultimate question is why the company leaders didn’t forcefully address the possible defect issues when deaths started to occur.

…continue reading: Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It”

The SEC in 2014

Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s remarks to the 41st Annual Securities Regulation Institute Conference; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

For nearly 80 years, the Securities and Exchange Commission has been playing a vital role in the economic strength of our nation. Year after year, the agency has steadfastly sought to protect investors, make it possible for companies of all sizes to raise the funds needed to grow, and to ensure that our markets are operating fairly and efficiently.

That is our three-part mission.

But, while commitment to this mission has remained constant and strong over the years, the world in which we operate continuously changes, sometimes dramatically.

When the Commission’s formative statutes were drafted, no one was prepared for today’s market technology or the sheer speed at which trades are now executed. No one dreamed of the complex financial products that are traded today. And, not even science fiction writers would have bet that individuals would so soon communicate instantaneously in so many different ways.

…continue reading: The SEC in 2014

Jamie Dimon’s Pay Raise Sends Mixed Signals on Culture and Accountability

Posted by Benjamin W. Heineman, Jr., Harvard Law School Program on Corporate Governance and Harvard Kennedy School of Government, on Monday February 3, 2014 at 4:46 pm
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Editor’s Note: Ben W. Heineman, Jr. is a former GE senior vice president for law and public affairs and a senior fellow at Harvard University’s schools of law and government. This post is based on an article that appeared in the Harvard Business Review online, which is available here.

The JP Morgan Chase board of directors has vexed the world with its terse announcement in a recent 8-K filing that CEO Jamie Dimon would receive a big pay raise—$20 million in total pay for 2013, up from $11.5 million for 2012, a 74 percent increase.

Not surprisingly, the news sparked strong reactions, from indignant critique to justification and support. Dimon’s raise obviously has special resonance because JP Morgan’s legal woes were one of the top business stories last year as it agreed to $20 billion in payments to settle a variety of cases involving the bank’s conduct since 2005 when Dimon became JPM CEO. But the ultimate question that gets fuzzed-over in the filing and response is one of culture and accountability—whether a long-serving CEO is accountable for a corporate culture that has spawned major regulatory inquiries and settlements across a broad range of legal issues, even though the firm has otherwise performed well commercially.

…continue reading: Jamie Dimon’s Pay Raise Sends Mixed Signals on Culture and Accountability

OCC Updates Guidance on Third-Party Risk Management

Posted by Lee A. Meyerson, Simpson Thacher & Bartlett LLP, on Sunday December 1, 2013 at 9:15 am
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Editor’s Note: Lee A. Meyerson is a Partner who heads the M&A Group and Financial Institutions Practice at Simpson Thacher & Bartlett LLP. This post is based on a Simpson Thacher memorandum.

On October 30, 2013, the Office of the Comptroller of the Currency (the “OCC”) issued updated guidance to national banks and federal savings associations on assessing and managing risks associated with third-party relationships, which include all business arrangements between a bank and another entity (by contract or otherwise). [1] The new guidance introduces a “life cycle” approach to third-party risk management, requiring comprehensive oversight throughout each phase of a bank’s business arrangement with consultants, joint ventures, affiliates, subsidiaries, payment processors, computer network and security providers, and other third parties. Rather than mandating a uniform set of rules, however, the guidance instructs banks to adopt risk management processes commensurate with the level of risk and complexity of its third-party relationships. Accordingly, the OCC expects especially rigorous oversight of third-party relationships that involve certain “critical activities.”

The revamped guidance reflects the OCC’s concern that the increasing risk and complexity of third-party relationships is outpacing the quality of banks’ risk management over these outsourcing arrangements. The guidance cautions that a bank’s failure to implement appropriate third-party risk management processes may constitute an unsafe and unsound banking practice, and could prompt formal enforcement actions or a downgrade in a bank’s CAMELS management rating to less than satisfactory. The severity of these consequences suggests that third-party risk management practices are becoming an increasingly important focus of OCC supervisory efforts.

…continue reading: OCC Updates Guidance on Third-Party Risk Management

The Importance of Trials to the Law and Public Accountability

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Wednesday November 27, 2013 at 9:00 am
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Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent delivery of the 5th Annual Judge Thomas A. Flannery Lecture, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

It is a great honor to have been asked to give the Fifth Annual Judge Thomas A. Flannery Lecture. And it is especially meaningful to be joined tonight by Tom Flannery’s daughter Irene, son Tom, and so many friends, colleagues, and former law clerks who knew and served with him.

I unfortunately did not have the privilege of knowing and working with Judge Flannery. But one of the great benefits of being asked to speak tonight is that it gave me the opportunity to come to know him a little—through learning about his many impressive career accomplishments and through reading his own words and those of others about him. I wish I had known him. He was indeed a remarkable man, lawyer, and judge.

As all here know, Judge Flannery was a highly-respected Assistant United States Attorney, United States Attorney, trial lawyer, and jurist on this court for over 35 years. In fact, he spent most of his life within a few miles of this courtroom.

As part of the Historical Society’s Oral History Project for this Circuit, Judge Flannery gave an interview in 1992. It is a fascinating account of his professional life and the life of this court. Judge Flannery said that his view of the justice system was shaped in great part by watching police court trials here in Washington as a law student.

…continue reading: The Importance of Trials to the Law and Public Accountability

The Autonomous Board

Editor’s Note: John Wilcox is chairman of Sodali, a co-chair of ShareOwners.org, and former Head of Corporate Governance at TIAA-CREF. This post is based on a Sodali publication by Mr. Wilcox.

“Can we end the long tradition of the boardroom as a sealed chamber…? Can we move toward more transparency about the boardroom process…?”
—Leon Panetta
[1]

Companies preparing for their annual shareholder meetings in 2014 should be aware of a new governance challenge: opposition to the election of individual directors is becoming a strategy of choice not only for activists but for “responsible” investors seeking change at portfolio companies. Withholding (or threatening to withhold) votes for incumbent directors, supporting short slate campaigns, or voting for dissident candidates in proxy contests are no longer considered hardball tactics for use only in extreme cases. Institutional investors who in the past would routinely support incumbent directors have learned an important lesson from the success of hedge funds and activists: targeting directors gets the immediate attention of companies, promotes dialogue, attracts media coverage and increases pressure on other investors to support shareholder initiatives.

…continue reading: The Autonomous Board

Implications of Recent Developments in SEC Enforcement

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday October 26, 2013 at 9:02 am
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Editor’s Note: The following post comes to us from Michael D. Trager, senior partner at Arnold & Porter LLP and chair of the firm’s Securities Enforcement Practice. This post is based on an Arnold & Porter memorandum.

In the six months since Mary Jo White was sworn in as the Securities and Exchange Commission’s 31st Chairman, the SEC has announced important new policies and initiatives as the agency has begun to utilize new enforcement authority under the Dodd-Frank Act and to redeploy resources. In recent weeks, White and Andrew Ceresney, Co-Director of the Division of Enforcement, have made important public announcements regarding enforcement priorities. Taken together, these policies, initiatives, and announcements signal a shift toward more aggressive enforcement. This advisory discusses these developments.

Approach to Enforcement

From the time of her nomination, White stressed that the SEC would take an aggressive approach to enforcement under her leadership. At her March 12, 2013 confirmation hearing, White pledged that one of her highest priorities as Chairman would be “to further strengthen the enforcement function of the SEC” in a way that is “bold and unrelenting.” White also stated that the SEC would pursue “all wrongdoers – individual and institutional, of whatever position or size” in order to deter wrongdoing and protect the integrity of financial markets. [1]

…continue reading: Implications of Recent Developments in SEC Enforcement

2013 CPA-Zicklin Index of Corporate Political Accountability and Disclosure

Posted by Bruce F. Freed, Center for Political Accountability, on Thursday October 17, 2013 at 9:17 am
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Editor’s Note: Bruce F. Freed is president and a founder of the Center for Political Accountability. This post is based on the 2013 CPA-Zicklin Index of Corporate Political Disclosure and Accountability by Mr. Freed, Karl Sandstrom, Sol Kwon, and Peter Hardin; the full report is available here. Work from the Program on Corporate Governance about corporate political spending includes Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert Jackson, discussed on the Forum here. A committee of law professors co-chaired by Bebchuk and Jackson submitted a rulemaking petition to the SEC concerning corporate political spending; that petition is discussed here.

Leading US public companies are making political disclosure and accountability a mainstream corporate practice. That’s a key finding of the 2013 CPA-Zicklin Index of Corporate Political Accountability and Disclosure released on September 25. Now in its third year, the Index benchmarked the top 200 companies of the S&P 500 on their policies and practices for disclosing, decision-making and managing the risks associated with their political spending. (The actual total was 195 after discounting mergers and other factors.)

The increase in the average overall Index score of all companies—a 41 percent jump from 38 last year to 51 in 2013—showed strong across the board improvement in company policies. Over three quarters of these companies—about 78 percent—saw their scores rise. Biggest gains came in board oversight, with 66 percent of the companies improving scores in that area, followed by disclosure, with 57 percent improving, and political spending policies, with 42 percent improving.

…continue reading: 2013 CPA-Zicklin Index of Corporate Political Accountability and Disclosure

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