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Back in 1970, the comedy troupe Monty Python aired a sketch entitled the “Ministry of Silly Walks.” This hilarious skit was a classic satire on the extremes of government power. Unfortunately, it may be time for us to come up with a Ministry of Dangerous Washington D.C. Pronouncements.
Senator Elizabeth Warren (D-MA) today sent a letter to President Barack Obama asking him to fire SEC Chair Mary Jo White. Senator Warren took this extraordinary action because the SEC has not moved forward on a rule mandating disclosure of political and lobbying spending by businesses. Senator Warren is also unhappy that the SEC has moved forward on a long overdue modernization of corporate disclosures that date back to the 1930’s.
Most would disregard this as more D.C. hot air, but sometimes a bunch of hot air can be a hurricane that you ignore at your own peril.
Senator Warren’s call to fire Chair White over SEC political and lobbying spending disclosures is extraordinary. Included in the budget and continuing resolution recently passed by Congress and signed by the President is language prohibiting the SEC from doing any work on a rulemaking on political spending disclosures. Therefore, Senator Warren is openly pressuring the SEC to take action that is prohibited by law. You may ask why she is doing so—because politically motivated activists are trying to shut down the free speech rights of the American business community.
A sorry state of affairs indeed.
Senator Warren also cited a 2014 Chamber study on disclosure effectiveness as to why the SEC should not move forward on efforts to modernize corporate disclosures. She went on to say that investors don’t care about modern corporate disclosures.
Unfortunately, she is missing some of the facts.
First, investors do care. Stanford University released a study in 2015 that had surveyed investors, with over $17 trillion of assets, on disclosures. The study showed 55% of those investors found the proxy statement to be too long, with 48% saying the disclosures were too difficult to read and understand. Furthermore, the investors surveyed found only a third of the disclosures to be relevant to their decision making process.
Second, the Chamber 2014 study made several proposals to modernize disclosures. These suggestions included removing the disclosure of an historic stock price and a graph of the stock price activity. That disclosure made sense in the era of the Roosevelt or Eisenhower administrations; however, with the iPhone in my pocket, I can tell you the price of a stock on any day it ever traded. Another disclosure required by the SEC is that an annual report or disclosures are available at the SEC’s reading room or available for printing free of charge. Today, these documents are available online. We have even made the suggestion of a company file to avoid duplicative filings of information and provide investors with easy access to information.
Finally, the Chamber report makes the suggestion about modernizing delivery systems. This is not the first time we have been on opposite sides of Senator Warren on these issues. This past summer we advocated an option for investors in mutual funds to have their information delivered electronically, while Senator Warren fought to keep a 1930’s paper bound system.
Seemingly Chair White has been working on the three points of the SEC’s mission—investor protection, competition, and capital formation. Clearly others don’t care, but you should—and you should make sure that your representative and senator care as well.