From the ashes, a new SEC attitude

by Stephen Butler

Help is on the way. At the Securities Exchange Commission, Mary Shapiro replaces Christopher Cox, the former Orange County U.S. representative who ran the agency into the ground.

Apart from the fact that there were unfilled vacancies on the commission for a good part of the Cox era, we are now learning that SEC policy was to allow no legal action to move forward without express approval from the handful of commissioners on the board. Considering that there were typically about 700,000 whistleblower reports per year that warranted at least a follow up, this sounds to me like a deliberately broken system --- the "less is more" school carried to a perverted extreme.

Those days are over. The new commissioner is moving forward at warp speed appointing people to positions that remained unfilled for months under the previous administration. My favorite appointee is Kayla Gillian, former CALPERS counsel, who engaged in a squabble with Commissioner Cox a year ago when she was with the Public Company Accounting Oversight Board. Seeing itself as the handmaiden of corporate management, the SEC was swatting away attempts at accounting board oversight. Those CPA concerns might just as well have been some 700,000 mosquitoes.

One of Gillian's first orders of business will be to lead a new investor advisory council and explore practical ways to empower shareholders in corporate governance issues.

Choosing corporate directors and limiting executive pay would be the natural by-product of these efforts.

Whatever most other industrialized countries have adopted should be good starting point.

We don't have to reinvent the wheel.

Speaking of wheels, when Chrysler was purchased by Mercedes-Benz a few years back, the first thing Mercedes told Chrysler's top management was that the gravy train was ending.

They would not be paid more than Germany's top management wage scale. Chrysler may have since fallen on hard times since then, but at least during its Mercedes era, we didn't have grotesque management compensation adding insult to injury.

While Congress is currently pondering the thought of doing away with the SEC altogether, that would be throwing the baby out with the bathwater. Meanwhile, Arthur Levitt would be great to have back on board.

The former and longest-serving SEC chairman wrote the book "Take on the Street" a few years ago. The subtitle was, "What Wall Street and Corporate America Don't Want You to Know, What You Can Do To fight Back."

Arthur Levitt's book illustrates the extent to which the SEC is heavily politicized.

After all, the agency exists at the will of Congress, so it can't be immune to political pressure.

Until the wheels totally fell off during the most recent regime, it was one of the most bipartisan departments, well, insulated from the graft and corruption that politics can introduce.

Hopefully, there are signs that this independence will become the norm once again. Shapiro's other choices for top administrators include the irrepressible Harvey Pitt who was fired a few years back for, among other things, trying to make the SEC chairmanship a cabinet level post, but he is reputed to be extremely knowledgeable and tenacious.

Now that he has the right handlers, we can expect more from him.

When we look back on this "downdraft" a few years from now, I think we'll conclude that it was one of the best things that could have happened to us. Corporate governance and responsible management have become an increasing right to us stockholders with every pay period's 401(k) deposit.

Until this crisis, we were heading for a world with no regulation and no opportunity to even initiate lawsuits against companies that were ripping us off. This time, we have finally driven a spike through the heart of what C. Wright Mills called "The Power Elite" in his '50s era book on the limitless control of modern corporate management. This experience is costing us all something, no question, but we have to remember, "No pain; No gain."

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