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Fixing the Revolving Door at the SEC

Submitted by Michael Connor on Thu, 02/12/2009 - 15:36.

As the new head of the Securities and Exchange Commission, Schapiro inherits a regulatory agency that many think has grown soft, comfortable and political over the course of the last eight years. One of her top priorities needs to be fixing the revolving door operating between the SEC and the very banks and investment houses the commission is charged with investigating.

The bias the SEC has historically shown toward traditional “Wall Street” firms has always been apparent, but never documented. Now, a new paper by Stavros Gadinis, a post-graduate fellow at Harvard Law School, suggests that SEC enforcement “favors defendants associated with big (listed) firms compared to defendants associated with smaller firms…Moreover, the paper finds tentative support for the hypothesis that SEC officials favor prospective employers.”

Indeed, the leading candidate for the now vacant position as head of the SEC’s enforcement division is a man who is currently very much a banker - Robert Khuzami, a managing director and general counsel at Deutsche Bank. Khuzami spent 11 years at the U.S. Attorney's office in Manhattan before taking a job at Deutsche Bank in 2002.

While Khuzami has his fans (we don’t know him), one would think there might be other candidates who would view the performance of the financial industry over the last decade with a somewhat more skeptical attitude than the top lawyer for one of the largest banks in the world.

In his paper, for example, Stavros Gadinis raises “concerns about the post-SEC career trajectories of agency officials, who find employment in big firms’ compliance departments or in premier law firms. The paper shows that big firms headquartered in favorable locations receive lower sanctions than big firms around the country, indicating that SEC officials may respond to future employment prospects.”

Business ethics

Read the first part of the article quickly. How would you summarise the writer's opinion? What do you think the word waffle means in the headline?

BUSINESS LIFE: Corporate responsibility without the waffle

By Alison Maitland

Passion, commitment, en­gagement, trust: it sounds like the start of a beautiful friendship. But when chief executives rely on these words to persuade a sceptical world of their company's responsible approach to society, they risk being a turn-off.

Almost every corporate responsibility report today kicks off with a message from the CEO or chairman. It presents an ideal opportu­nity to explain in concrete terms what being 'responsi­ble' means for your business. It is a chance to show share­holders and other stakehold­ers that you understand the social or environmental risks facing your industry and that you are tackling them at board level.

These are issues that big investors will want to know even more about in the com­ing year - how companies are handling potential threats to long-term shareholder value, such as climate change, the explosion in obe­sity or human-rights law­suits. New regulations, such as the forthcoming operat­ing and financial review in the UK, will reinforce the need for a broad approach to risk management.



Yet some chief executives' messages are curiously cut off from these developments. Indeed, it can be hard to work out precisely what risks a company faces among the warm, fuzzy gen­eralisations that still popu­late the language of corpo­rate social responsibility.

Take the following from A word with Franck Riboud', chairman and chief execu­tive of Danone, best known for dairy products such as yoghurt. 'Danone Way is a response to a real need - which is to preserve and pass on a culture based on our dual commitment to busi­ness success and social progress,' he says.

Or this from the foreword to Toshiba's latest corporate social responsibility report by Tadashi Okamura, presi­dent and CEO: 'For almost 130 years, Toshiba has been a force for social progress ... Along the way, we have earned the trust of society, and it is this trust that is our true reason for being. It is our motivation and our inspiration.'

John Elkington, co-direc­tor of SustainAbility, an international consultancy that tracks trends in non-financial reporting, says few forewords feel as if they have been written by the CEO as opposed to the public rela­tions department. 'You rare­ly get a sense from the fore­word about whether the CEO or chairman has read the report, or what they have found interesting and sur­prising.'


Date: 2016-01-14; view: 1764


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