July 21, 2016

More on “Congress Being Congress: What Does “Defunding” a Rule Even Mean?”

Recently, I blogged about how it wasn’t clear what Congress would mean if it passed a budget bill that wouldn’t allow the SEC to conduct rulemaking or enforce certain rules. I indicated that the SEC hasn’t been faced with that type of law before. But I have since discovered that other federal agencies have – and that Congress has been playing this game with other agencies more often these days. For example, Congress recently limited the US Consumer Product Safety Commission’s ability to use appropriated funds to proceed with proposed rulemaking.

Without getting too far into the arcane details of federal appropriations law (for that, see this report), agencies are allowed to use appropriated funds only for “the objects for which the appropriations were made, except as otherwise provided by law.” There is a multi-part “purpose test” that is applied. If Congress makes a specific use of funds impermissible, then appropriated funds may not be spent for the prohibited purpose. The risk of spending appropriated funds in violation of Congressional limitations, among other things, is a possible “Antideficiency Act” violation, which must be reported to Congress and the President – and which could result in disciplinary action, civil and possible criminal penalties for the employees responsible for the violation.

An agency subject to this sort of limitation (if enacted and signed into law) must restrict its Staff from spending time on the prohibited activities. Just how far that agency has to go will depend on the exact language of the limitation. If drafted appropriately, the limitation could preclude a government employee from spending any type of time on the prohibited actions. In other words, Congress could prevent an agency’s staff from spending any time on implementation, enforcement or interpretation of a rule – even if that rule has been promulgated in final form (whether or not the effective date has arrived).

The bigger point is that this technique – which is quite controversial & has resulted in Presidential veto threats – is not unique to the SEC. And it’s increasingly being advocated by any number of special interest groups, depending on the agency and the substance. Hat tip to Stephanie Tsacoumis for her help sorting this out!

SEC’s Revolving Door: Will It End If Clinton Wins?

Here’s an excerpt from this MarketWatch article:

The reform-minded wing of the Democratic Party, led by Senator Elizabeth Warren, takes credit for pushing an affirmation of the classic political adage, “personnel is policy”, into the platform. The platform says it will nominate regulators who aren’t beholden to the industries they regulate, crack down on the revolving door between the private sector and Wall Street, and ban golden parachutes for those taking government jobs.

So does that spell a Wall Street-free administration if Hillary Clinton is elected? Maybe not. Former Commodity Futures Trading Commission chairman Gary Gensler, now the chief financial officer of the Hillary Clinton campaign, is frequently mentioned as a possible Treasury Secretary candidate in a Clinton administration despite being a former executive of Goldman Sachs GS.

Binding Say-on-Pay: Finally Coming to the UK?

You might recall that the concept of non-binding say-on-pay came from across the pond. The British had implemented say-on-pay a decade before the US. More recently, the UK has been close to adopting binding say-on-pay (see this blog that I wrote on – and even the European Commission proposed it a few years back.

In the wake of Brexit, it looks like the new UK Prime Minister Theresa May is seeking a number of governance reforms – as noted in this excerpt from the Glass Lewis blog:

On July 11 Theresa May launched her subsequently successful campaign to become leader of the Conservative Party and, by extension, Prime Minister of the UK, under the slogan “A country that works for everyone, not just the privileged few”. Having outlined her broader vision for the economy, Ms. May’s speech quickly turned to matters of corporate governance under the themes of “Putting people back in control” and “Getting tough on corporate irresponsibility”.

In detailing her priorities, Ms. May vowed to push for employee representatives on boards and to make shareholder votes on executive remuneration legally binding, moves which are likely intended to address growing inequality and perceived public distrust in the establishment, business and politicians.

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Broc Romanek