Statement of the Council of Institutional Investors in Response to the Report of the Committee on Capital Markets Regulation

30 Nov, 2006, 00:00 ET from Council of Institutional Investors

    WASHINGTON, Nov. 30 /PRNewswire/ -- The Council of Institutional
 Investors disagrees strongly with the Committee on Capital Markets
 Regulation's assertion that overzealous regulation is stifling U.S.
 competitiveness. We also believe that many of the panel's recommendations,
 if adopted, would undermine the effectiveness of market watchdogs and
 weaken critical investor protections.
     However, we commend the committee for acknowledging the importance of
 shareowner rights and recognizing that the U.S. capital markets need to
 strengthen these rights. While we support the committee's recommendations
 in this area, we think that further steps should be taken to safeguard
 shareowner rights. Accordingly, we encourage the committee to:
     * Urge all corporate boards, not just those with classified voting
       structures, to obtain shareowner approval before adopting "poison pill"
       anti-takeover measures;
     * Encourage all states to change their corporation laws to require
       majority voting for directors; and
     * Call on the Securities and Exchange Commission to ensure that
       shareowners have some ability to nominate their own board candidates to
       be included on management proxy ballots.
     The integrity and efficiency of the U.S. capital markets are vitally
 important to the Council of Institutional Investors. Our members have a
 significant, long-term commitment to the domestic marketplace. Council
 members and other investors shoulder the costs of legal and regulatory
 inefficiencies. But they also suffer when rules fail to protect investors.
 "We support efforts to address market inefficiencies, so long as they do
 not put investors at risk," says Ann Yerger, the Council's executive
 director.
     The Council agrees that the SEC and the Public Company Accounting
 Oversight Board should ensure that Section 404 of the Sarbanes-Oxley Act is
 implemented in a way that is risk-based and cost-effective. We applaud
 their current efforts to achieve these goals. We are optimistic that the
 SEC and the PCAOB will fix the implementation problems with Section 404,
 and confident that there will be no need to exempt the smallest U.S.
 publicly traded companies.
     While the committee raises legitimate questions about the level of
 regulation and litigation, we think it views these issues through far too
 narrow a prism, by focusing primarily on the market for initial public
 offerings. IPOs, while a key source of revenue for Wall Street investment
 bankers, are not the sole, nor the best, basis on which to judge the health
 of the U.S. economy or the appropriateness of U.S. rules and laws. And the
 committee's contention that fear of lawsuits and excessive regulation,
 particularly costs associated with Section 404, have driven the decline in
 IPO listings is off-base. The U.S. share of the IPO market peaked a decade
 ago, long before Sarbanes-Oxley and other post-Enron reforms. Several
 factors have contributed to the erosion of U.S. dominance of the global IPO
 market, including:
     * Privatization of state-owned enterprises in emerging markets (Not
       surprisingly, governments selling off such businesses often prefer a
       listing on their home exchanges);
     * High U.S. investment banking fees relative to underwriting fees on
       European exchanges; and
     * Growing globalization, which has increased the sophistication of
       emerging markets.
     U.S. markets enjoy the lowest cost of capital. The amount of money
 raised by foreign companies in U.S. IPOs has grown since Sarbanes-Oxley was
 enacted in the wake of a shocking series of corporate scandals. In the
 first eight months of 2006, it hit $5.8 billion, the highest level since
 2000. Rigorous U.S. investor protections are a boon, not a bust, for our
 capital markets.
     The Council of Institutional Investors is a not-for-profit association
 of 140 public, union and corporate pension funds with assets exceeding $3
 trillion. The Council works to educate members and the public about
 corporate governance, and to advocate for strong governance standards on
 issues ranging from executive compensation to the election of corporate
 directors.
 
 

SOURCE Council of Institutional Investors
    WASHINGTON, Nov. 30 /PRNewswire/ -- The Council of Institutional
 Investors disagrees strongly with the Committee on Capital Markets
 Regulation's assertion that overzealous regulation is stifling U.S.
 competitiveness. We also believe that many of the panel's recommendations,
 if adopted, would undermine the effectiveness of market watchdogs and
 weaken critical investor protections.
     However, we commend the committee for acknowledging the importance of
 shareowner rights and recognizing that the U.S. capital markets need to
 strengthen these rights. While we support the committee's recommendations
 in this area, we think that further steps should be taken to safeguard
 shareowner rights. Accordingly, we encourage the committee to:
     * Urge all corporate boards, not just those with classified voting
       structures, to obtain shareowner approval before adopting "poison pill"
       anti-takeover measures;
     * Encourage all states to change their corporation laws to require
       majority voting for directors; and
     * Call on the Securities and Exchange Commission to ensure that
       shareowners have some ability to nominate their own board candidates to
       be included on management proxy ballots.
     The integrity and efficiency of the U.S. capital markets are vitally
 important to the Council of Institutional Investors. Our members have a
 significant, long-term commitment to the domestic marketplace. Council
 members and other investors shoulder the costs of legal and regulatory
 inefficiencies. But they also suffer when rules fail to protect investors.
 "We support efforts to address market inefficiencies, so long as they do
 not put investors at risk," says Ann Yerger, the Council's executive
 director.
     The Council agrees that the SEC and the Public Company Accounting
 Oversight Board should ensure that Section 404 of the Sarbanes-Oxley Act is
 implemented in a way that is risk-based and cost-effective. We applaud
 their current efforts to achieve these goals. We are optimistic that the
 SEC and the PCAOB will fix the implementation problems with Section 404,
 and confident that there will be no need to exempt the smallest U.S.
 publicly traded companies.
     While the committee raises legitimate questions about the level of
 regulation and litigation, we think it views these issues through far too
 narrow a prism, by focusing primarily on the market for initial public
 offerings. IPOs, while a key source of revenue for Wall Street investment
 bankers, are not the sole, nor the best, basis on which to judge the health
 of the U.S. economy or the appropriateness of U.S. rules and laws. And the
 committee's contention that fear of lawsuits and excessive regulation,
 particularly costs associated with Section 404, have driven the decline in
 IPO listings is off-base. The U.S. share of the IPO market peaked a decade
 ago, long before Sarbanes-Oxley and other post-Enron reforms. Several
 factors have contributed to the erosion of U.S. dominance of the global IPO
 market, including:
     * Privatization of state-owned enterprises in emerging markets (Not
       surprisingly, governments selling off such businesses often prefer a
       listing on their home exchanges);
     * High U.S. investment banking fees relative to underwriting fees on
       European exchanges; and
     * Growing globalization, which has increased the sophistication of
       emerging markets.
     U.S. markets enjoy the lowest cost of capital. The amount of money
 raised by foreign companies in U.S. IPOs has grown since Sarbanes-Oxley was
 enacted in the wake of a shocking series of corporate scandals. In the
 first eight months of 2006, it hit $5.8 billion, the highest level since
 2000. Rigorous U.S. investor protections are a boon, not a bust, for our
 capital markets.
     The Council of Institutional Investors is a not-for-profit association
 of 140 public, union and corporate pension funds with assets exceeding $3
 trillion. The Council works to educate members and the public about
 corporate governance, and to advocate for strong governance standards on
 issues ranging from executive compensation to the election of corporate
 directors.
 
 SOURCE Council of Institutional Investors