SEC Chairman Says Businesses Will Have To Share Information

Nomaan Merchant

By Nomaan MerchantThe Daily Northwestern

Corporations must be held to high standards of openness for the benefit of shareholders, said Christopher Cox, the chairman of the U.S. Securities and Exchange Commission, to a crowd of about 300 Monday night at the Northwestern School of Law in downtown Chicago.

The SEC chairman since August 2005, Cox discussed a measure enacted during his tenure that will force companies to disclose the total compensation of their executives.

He said the measures would affect many of the law and business graduate students in the room.

“If you graduate from these esteemed programs here at Northwestern and someday make it to the executive suite,” Cox said, “the SEC rules going into effect this year will require you to disclose everything you make.”

Cox represented Orange County, Calif., in the U.S. House of Representatives for 17 years before his appointment. He also served as former President Ronald Reagan’s senior associate counsel from 1986 until 1988.

One of his main goals when he started at the SEC was to simplify the “gobbledygook” in shareholder documents into “plain English,” he said. Prior to this year, companies would disclose private information as required by law. But Cox said full disclosure is useless if the information cannot be understood.

“We have to ask ourselves if it’s up to the investor to piece it all together,” Cox said. “If somebody orders a steak, you don’t give them a cow and a meat cleaver.”

This year, corporations will be forced to make clear compensation figures – including stock options, retirement funds and bonuses – on end-of-year statements sent to investors, Cox said. These statements also will include “a principles-based narrative about what exactly the compensation figure means,” he said.

Increasing accountability might cause some inconvenience to companies at first, but will prove vital to preventing deception of the public, Cox said.

“What the SEC has in mind is no less than transforming the landscape of public disclosure for the benefit of shareholders,” he said.

Cox defended the hotly debated Sarbanes-Oxley Act, which both houses of Congress passed almost unanimously in 2002 in the wake of scandals involving multiple corporations, including oil giant Enron. The act increases shareholder access to financial records of corporations.

Despite complaints from foreign investors, Cox said the bill is being emulated throughout Europe.

“I think we’re getting it right,” Cox said. “The rest of the world by imitation is telling us we’re getting it right, and the world’s markets will be a better place.”

Cox pointed out that although Chicago might be known as the “Second City,” the city’s four stock exchanges make it a vital part of the global market.

“There’s nothing ‘Second City’ about Chicago when it comes to markets and investments,” Cox said.

Students who attended said they enjoyed the lecture and that it fit in with material presented in classes. Some said they expected more technical details in Cox’s talk.

“I thought he was going to talk about the future of the SEC, and he kind of focused on just the executive compensation stuff,” Kellogg student Yvonne Chao said.

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