SEC's Cox needs courage--and wisdom.
THE NOMINATION of Rep. Christopher Cox as chairman of the Securities and Exchange Commission is welcome news. He has an opportunity to turn back the tide of regulatory creep. There will be many crucial issues before him--Sarbanes-Oxley, the expensing of stock options, hedge fund hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" regulation, so-called shareholder democracy proposals and more.
Cox is a big believer in letting markets work. We like that. He needs the courage to do the right things as well as the wisdom not to go too far. We hope he will apply the wisdom of the Coase theorem In law and economics, the Coase theorem, attributed to Ronald Coase, describes the economic efficiency of an economic allocation or outcome in the presence of externalities. , named for Nobel Prize Nobel Prize, award given for outstanding achievement in physics, chemistry, physiology or medicine, peace, or literature. The awards were established by the will of Alfred Nobel, who left a fund to provide annual prizes in the five areas listed above. winner Ronald Coase Ronald Harry Coase (b. December 29, 1910) is a British economist and the Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School. After studying with the University of London External Programme in 1927-29, Coase entered the London School of , which suggests that government should make a decision, then let the markets go to work.
Take Sarbox. We at Chief Executive and other business voices have made it abundantly clear that the law went too far. Intellectually, we won the argument. But politically speaking, Congress can't vote to "water down" or "ease up" on Sarbox.
That's why it's up to Cox to work within the SEC and with the Public Company Accounting Oversight Board The Public Company Accounting Oversight Board (or PCAOB) (sometimes called "Peekaboo") is a private-sector, non-profit corporation created by the Sarbanes-Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. to improve the regulations that guide Sarbox. There should be clarification of the fuzzy terms that drive CEOs mad--such as "material weakness." Cox also should labor to eliminate the overlapping work that different auditors do. And he should provide a different approach for small and midsized companies. None of this will be popular on Capitol Hill. That's why Cox needs courage.
But he shouldn't go too far. Companies of all sizes have spent millions of dollars and countless hours to come into compliance. Too much abrupt change, or a series of contradictory signals, would force everyone to go through another expensive learning curve. What CEOs want is predictability and a measure of stability. Cox should make the necessary tweaks, and then signal that it's time It's Time was a successful political campaign run by the Australian Labor Party (ALP) under Gough Whitlam at the 1972 election in Australia. Campaigning on the perceived need for change after 23 years of conservative (Liberal Party of Australia) government, Labor put forward a to move on.
A carefully modulated mod·u·late
v. mod·u·lat·ed, mod·u·lat·ing, mod·u·lates
1. To adjust or adapt to a certain proportion; regulate or temper.
2. Coase-ian approach is necessary across his entire agenda. And Cox should not allow his position to become politicized. As much as we may have disagreed with Bill Donaldson, he displayed real integrity. Cox should take note of that as he attempts to strike the right balance in his new job.