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CII welcomes Senate corporate governance reforms

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The Council of Institutional Investors has welcomed Senator Christopher J. Dodd’s efforts to address the failures by corporate boards that contributed to the financial crisis.

The financial regulation bill introduced by Senator Dodd (pictured) includes corporate governance provisions that require all directors of public companies to be elected by a majority of votes cast by shareowners.

It also reaffirms 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," says 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."  

The CII 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 defence against speculative excess – it’s their job to monitor management on behalf of shareowners," Yerger says. "Yet at one financial institution after another, boards either didn’t realise 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 bill also includes provisions to strengthen the oversight and accountability of credit rating agencies, establish meaningful regulation of trading in over-the-counter derivatives and bolster the resources and independence of the Securities and Exchange Commission. 
 

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