CII Applauds Senate Corporate Governance Reforms

WASHINGTON, March 15 /PRNewswire-USNewswire/ --The Council of Institutional Investors applauds Senator Christopher J. Dodd's (D-Conn.) efforts to address the serious failures by corporate boards that contributed to the financial crisis.

In particular, the Council is pleased that the financial regulation bill that Senator Dodd unveiled today includes corporate governance provisions that: 1) require all directors of public companies to be elected by a majority of votes cast by shareowners and 2) reaffirm the Securities and Exchange Commission's authority to issue "proxy access" rules that would make it easier for investors to nominate their own director-candidates for corporate boards.

"The reforms in Senator Dodd's bill are important tools that investors need to hold directors' feet to the fire," said Ann Yerger, executive director of the Council of Institutional Investors.  "With majority voting and proxy access, directors would know that if they do a bad job, they could lose their board seats.  That would prod boards to keep a closer eye on management."   Better corporate governance at U.S. companies would guard against excessive risk-taking in the future and help restore investor confidence.

The Council believes that the financial crisis was a massive failure of oversight – by both regulation and boards.  Improving the regulatory system alone is not enough to protect investors and taxpayers.  "Corporate boards are a critical market-based line of defense against speculative excess – it's their job to monitor management on behalf of shareowners," Yerger said.  "Yet at one financial institution after another, boards either didn't realize that senior executives were plunging their companies headlong into complex, risky investments, or they were too cowed to challenge the executives leading the charge."

The Council is also pleased that Senator Dodd's bill includes provisions to strengthen the oversight and accountability of credit rating agencies, establish meaningful regulation of trading in over-the-counter (OTC) derivatives and bolster the resources and independence of the Securities and Exchange Commission.  We look forward to reviewing those provisions carefully before commenting on them.

Senator Dodd's regulatory reform proposal is an important step in the right direction.   The Council looks forward to working with Senator Dodd and Senator Richard Shelby (R-Ala.), the ranking member of the Senate Banking Committee, on comprehensive reform legislation.

The Council of Institutional Investors (CII) is a nonprofit association of public, union and corporate pension funds with combined assets that exceed $3 trillion. Member funds are major long-term shareowners with a duty to protect the retirement assets of millions of American workers. The Council strives to educate its members, policymakers and the public about good corporate governance, shareowner rights and related investment issues, and to advocate on members' behalf.

SOURCE Council of Institutional Investors