The Great Debate

from Breakingviews:

James Hoffa: Let sun shine on corporate donations

By James Hoffa
The author is a Reuters Breakingviews guest columnist. The opinions expressed are his own.

Companies increasingly are playing an outsized role in U.S. elections. In many cases, they donate money to advocate controversial policies that could antagonize their customers and undermine their businesses. Because so many of these contributions are not disclosed, however, shareholders are left in the dark and unable to evaluate potential conflicts or risks.

Investors are demanding improved corporate disclosures through shareholder resolutions and by urging the Securities and Exchange Commission to adopt new rules. Despite hundreds of thousands of letters from investors urging the agency to take action, it dropped the issue from its list of regulatory priorities earlier this year.

While some companies have done the right thing by making all their political expenditures public, there are still too many publicly listed ones that refuse to raise the veil of secrecy regarding their political giving.

The Teamsters invests more than $100 billion in the capital markets through affiliated pension and benefit funds. In addition, our members trade as individuals and as participants in employer-sponsored plans. We are part of a growing chorus of shareholders concerned about political spending.

from Breakingviews:

Rob Cox: Coke takes fizz out of shareholder spring

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

America’s shareholder spring hit a cold patch. Just when it seemed investors were finally breaking through entrenched boards’ barricades, the owners of Coca-Cola turned to jelly, led shockingly by Warren Buffett. The failure to challenge a transfer of vast shareholder treasure to the top 5 percent of Coke’s soda jerks shows the agency problem is still alive and well in American capitalism.

Not that investors will retreat from behaving more like owners. Greater shareholder democracy is still on the march. Last month, for instance, activists made nearly 100 U.S. Securities and Exchange Commission filings, exceeding the February number by a third, according to Activist Insight.

from Breakingviews:

Rob Cox: GE should put itself up for sale

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

General Electric should sell itself. If that sounds like an April Fools’ Day joke, think again. It’s a real proposal on the ballot at the industrial group’s annual meeting. Setting aside the absence of any obvious buyer for the $260 billion company, the proposition illustrates the kind of shareholder democracy gone wild that many boards, and even some regulators, would like to squelch. They have half a point.

The proposal is one of about six that investors put forward and will be up for a vote at GE’s April 23 annual meeting in Chicago. Not all are quite so extreme. One calls for senior executives to hold options for life. Another would end stock awards and bonuses. Naturally, management is opposed to each of them.

Five steps the SEC can take to make crowdfunding work

A few weeks ago, President Obama signed the JOBS Act into law, making equity-based crowdfunding legal for businesses that want to raise capital in smaller amounts than traditional venture capitalists or accredited investors supply. Depending on who you ask, crowdfunding is either going to democratize access to capital and serve as a boon to small businesses across America, or it will be rife with con artists intent on bilking seniors out of their hard-earned savings.

Let’s hope the former is true. But concerns about fraud must be addressed so the emerging market can thrive without being spoiled by fraud and scams.

The Securities and Exchange Commission is currently writing rules that will govern crowdfunding and, it’s hoped, guarantee its success. (Disclosure: I worked as a securities lawyer at the SEC from 1986 to 1990.) To properly regulate crowdfunding without suffocating it at inception, the regulators at the SEC must strike the right balance between guarding against fraud and allowing the marketplace to work its will.

The Trojan Horse of cost benefit analysis

By John Kemp
The writer is a Reuters market analyst. The views expressed are his own.

LONDON – Should federal government agencies have to prove the benefits of new regulations outweigh the costs before introducing them?

It sounds like a simple question with an obvious answer. But the role of cost-benefit analysis in writing federal regulations (and even laws) is shaping up to be one of the biggest battles between the Obama administration and business groups in 2012.

Making oil and mining dollars transparent

By Raymond C. Offenheiser
The opinions expressed are his own.

For most of us, this July 15th will be the start of just another hot summer weekend. But for many, the day marks the one-year anniversary of Congressional approval of a landmark law that will lift the veil of secrecy on billions of dollars that flow every year from oil and mining companies to governments around the world.

Tucked into the massive Dodd-Frank Wall Street Reform and Consumer Protection Act is a provision requiring oil, gas and mining companies reporting to the US Securities and Exchange Commission (SEC) to disclose the payments they make to host governments.

From rural villagers in Africa to investors on Wall Street, the groundbreaking law casts the transparency net far and wide, arming the public with information it can use to track the amount of money governments receive from oil and mining companies. The provision, backed by a bipartisan group including Senators Lugar and Cardin, among others, requires annual reporting of taxes, royalties and other payments, and covers a broad range of US, European, Chinese, Brazilian and other companies. By law, the final regulation from the SEC — the regulatory agency responsible for implementing the law — should have been issued in April. However, no final rule has been issued.

from Reuters Money:

Consumer cops: Why we need Mary Schapiro and Elizabeth Warren now

U.S. Securities and Exchange Commission (SEC) Chairman Mary Schapiro answers a question at the Reuters Future Face of Finance Summit in Washington March 1, 2011. REUTERS/Kevin Lamarque Two women are fending off a vicious man-handling of investor protection.

As Congress pettily wrangles over the debt limit and the next budget, Mary Schapiro and Elizabeth Warren are fighting to protect you against the ravages of Wall Street.

Wall Street and its Republican allies would like to make the Dodd-Frank financial reforms disappear. The money trust has been pouring millions into lobbying to eviscerate the budget of the Securities and Exchange Commission and blocking the formation of the Consumer Financial Protection Bureau.

Mary Schapiro, who chairs the SEC, said she can't kick start the myriad pro-investor rules of Dodd-Frank without adequate funding. Republicans, lead by Budget Committee Chairman Paul Ryan, want to "starve the beast" in their fiscal year 2012 proposal.

Goldman anger is misplaced


The following is a guest post by Dana Radcliffe, a senior lecturer of business ethics at the Johnson Graduate School of Management at Cornell University. The opinions expressed are his own.

The day after the Securities and Exchange Commission announced its $550 million settlement with Goldman Sachs, three noted business journalists appeared on a popular current affairs TV show. They concurred that the deal was a win for Goldman since the dollar amount was surprisingly low — equal to what the firm earns in just a few weeks. They felt the SEC’s case was weak and that, legally, Goldman had done nothing wrong and would have prevailed in court.

They also agreed that people were understandably appalled by some of the firm’s conduct in the subprime mortgage crisis in light of the flood of emails and other internal company documents released by Congress and Goldman. Grasping for a way to express what was repellent about such actions, one of the writers described them as “icky.” Another airily noted that they might be seen as wrong “in some ethical, moral, or philosophical sense.”

Goldman’s troubles will end when Blankfein goes

OBAMA/The following is a guest post by Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics. You can also follow him on twitter. The opinions expressed are his own.

As Congress was approving financial reform legislation yesterday, Goldman Sachs agreed to pay $550 million to the SEC to settle a civil lawsuit that claimed Goldman had misled investors in a subprime mortgage product as the housing market began to collapse three years ago. The settlement marks the beginning of the end of Goldman’s public humiliation for its relatively small part in the subprime debacle, but the firm still has a great deal of work to do to satisfy the conditions of its settlement, repair its relationship with clients and mend its damaged public reputation.

I have had a “neutral” rating on the forward operating results of GS since Q1 of this year and will leave that rating in place for two reasons. First, the carry trade reflected in record net interest margins in the banking industry is going to slowly diminish at GS and many other banks. Unless the Fed allows interest rates to rise soon, all of the assets of banks and funds will gradually re-price to near-zero. When the media waxes euphoric over the “trading” results of firms like GS, they fail to realize that much of trading revenue comes from simple interest rate spreads over funding.

Senate vote exposes Wall Street impotence

Wall Street’s diminished influence in Washington was made plain yesterday when the Senate voted to approve financial reform legislation by 59 votes to 39.

Industry lobbyists will point out the bill only just managed to scrape the required votes needed to end debate and forestall a filibuster. It fell far short of a lopsided bipartisan majority.

But the formal tally on HR 4173 (Wall Street Reform and Consumer Protection Act 2009) as amended by S 3217 (Restoring American Financial Stability Act 2010) conceals a much wider bigger majority of 63-37 for enacting far-reaching reforms.