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Letter on amendment #3, offered by Representative Maxine Waters, regarding the Securities and Exchange Commission's (SEC) authority on proxy access

Release Date: 
Tuesday, October 27, 2009

October 27, 2009


The Honorable Barney Frank
Chairman

Committee on Financial Services

U.S. House of Representatives

Washington, DC 20515

The Honorable Spencer Bachus

Ranking Member
Committee on Financial Services
U.S. House of Representatives
Washington, DC 20515


Dear Chairman Frank and Ranking Member Bachus:


The U.S. Chamber of Commerce, the world¡¦s largest business federation representing more than three million businesses and organizations of every size, sector, and region, believes that strong corporate governance is an important part of the foundation for a vibrant and growing economy. However, the Chamber opposes amendment #3, offered by Representative Maxine Waters, regarding the Securities and Exchange Commission's (SEC) authority on proxy access. By seeking to impose a "one-size-fits-all" approach, the proposed Waters Amendment would harm economic growth and job creation. Specifically:

  • By federalizing corporate law, the Waters Amendment would reverse the longstanding history of state corporate law and negate the sophisticated expertise developed in state courts on issues of corporate law. Investor choice is the touchstone of state law because it empowers shareholders and board of directors to choose a governance structure that works best for the company. State law has also fostered diverse structures and management systems that have enabled public corporations to adapt successfully to economic and competitive challenges.
  • The SEC would be distracted from regulating financial markets and its resources further strained if the Waters Amendment is enacted. The primary focus of the SEC is investor protection and the safety and soundness of the financial markets. The current financial crisis has demonstrated that these missions can be daunting particularly with finite resources and expertise. Under the proposed changes to proxy access, the SEC would be forced to regulate and monitor thousands of elections in public companies annually. The SEC has traditionally not played this role. It lacks the expertise and resources to perform this mission and would be forced to divert resources needed for investor protection and market integrity.
  • The Waters Amendment would hamstring Main Street while trying to correct the problems of Wall Street. Of the more than 15,000 public companies in the United States, less than 600—approximately 3 percent—are TARP recipients. The vast majority of public companies had nothing to do with the financial crisis, yet each and every one would be tarred with the same corporate governance "reform" brush if the Waters Amendment is adopted. These proposals, in other words, are solutions in search of a problem.
  • A federal right to proxy access is not needed since states have already been enhancing shareholder rights. This year, Delaware enacted legislation clarifying the authority of companies and their shareholders to adopt proxy access and proxy reimbursement bylaws, and an American Bar Association committee is addressing similar amendments to the Model Business Corporation Act on which 30 state corporate statutes are based. The Waters Amendment deprives shareholders of existing rights and would weaken existing corporate governance structures.
  • The Waters Amendment would disenfranchise individual investors and would empower special interests. Participation of small investors in corporate elections continues to drop and the repeal of the broker vote would accelerate this process. This furthers efforts geared to place large activist shareholders at the head of the line.

If enacted, the SEC would become the referee for director elections throughout the United States for thousands of public companies. This would distract time, resources, and focus from the SEC at a time when they are attempting to reassert their primacy as a safety and soundness regulator for investors and the financial markets. The Waters Amendment would create a federal one size fits all approach that will destroy the 150-year old system of state law that has provided for the most productive and dynamic economy in world history.


For the reasons discussed above, the Chamber urges you to oppose the Waters Amendment(#3).


Sincerely,


R. Bruce Josten


Cc: The Members of the House Committee on Financial Services