TheCorporateCounsel.net

Yesterday, Commissioner Hester Peirce kicked off the Northwestern Securities Law Institute by offering a preview of what public companies might expect to see from the SEC over the next few years. Her remarks were accompanied by the usual disclaimers, but both Commissioner Peirce and Acting Chair Mark Uyeda worked closely with Paul Atkins during his previous time with the SEC, so it’s probably not much of a stretch to suggest that her views on the agency’s priorities likely align with those of her current and future Republican colleagues.

Commissioner Peirce is well known for colorful analogies in her speeches, and she didn’t disappoint yesterday. She opened her remarks by comparing the environment that public companies have to navigate today with the “steep, varied” terrain “fraught with danger” that Sierra Nevada Bighorn Sheep confront every day. She then provided a prescription for actions that the SEC should take to help provide public companies with “a path toward more level, predictable terrain.”

Commissioner Peirce called for the SEC to recognize that both the public companies and the SEC have limited missions. Public companies exist to build long-term value for shareholders, and the SEC’s role is to “ensure that investors have the information they need to channel funds to the companies that can put that money to the best use.”  In her opinion, these limited missions require the SEC to prioritize the following policy objectives:

– Fend off efforts to commandeer the SEC’s disclosure regime by people who “want information from companies for reasons other than deciding whether to invest” by returning to a position that “materiality from the perspective of the reasonable investor is the sine qua non for disclosures.”

– Stop pressuring asset managers to push public companies into contentious social and political issues through voting disclosure obligations that make them “sitting ducks” for social and political activist campaigns and scrutiny from ESG rating agencies.

– Protect investors from having their resources diverted to deal with shareholder proposals that are not aimed at maximizing corporate value by reexamining Rule 14a-8’s ownership thresholds and taking “a fresh look at how Rule 14a-8’s consideration of social significance under two bases of exclusion has affected the number, type, and excludability of shareholder proposals.”

– Refrain from using enforcement actions to override managerial decisions through an expansive definition of “internal controls” that enables the SEC to “insinuate itself into corporate management.”

– Enhance Corp Fin and OCA’s efforts to provide disclosure guidance to public companies, to engage with them on difficult disclosure issues, and to communicate early and often on the timing of reviews of registration statements in order to permit issuers to have increased confidence in their offering timelines.

– Ensure that the capital markets function in a way that is agnostic to the political party in power and serve all Americans regardless of their political ideology.

Your mileage may vary on the reasonableness and achievability of at least some of these objectives from a public policy perspective, but I think anyone who works with public companies would concede that there’s a lot to like about them from a public company perspective.

– John Jenkins