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Reforming Wall Street -- What Will Congress Do? Presentation for the 2010 IRGR North America Workshop & Award Ceremony

Reforming Wall Street -- What Will Congress Do? Presentation for the 2010 IRGR North America Workshop & Award Ceremony

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Published by IR Global Rankings
Professor of Law, Columbia Law School / John Coffee presentation at the 2010 IRGR North America Workshop & Award Ceremony held in USA, New York on April 6, 2010
Professor of Law, Columbia Law School / John Coffee presentation at the 2010 IRGR North America Workshop & Award Ceremony held in USA, New York on April 6, 2010

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Published by: IR Global Rankings on Jun 08, 2010
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06/08/2010

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REFORMING WALL STREET:
What Will Congress Do AboutCorporate Governance?
John C. Coffee, Jr.
Slide 1
April 6, 2010IR Global Rankings ConferenceYale Club of New York
 
Introduction1.In the wake of the worst financial crisis in over seventy five years, Congress ispursuing financial reform. H.R. 4173 passed the House of Representatives inDecember, and the “Restoring American Financial Stability Act of 2010” (the“Dodd Bill”) was approved by the Senate Banking Committee on March 15,2010 (on a party-line vote).2.The odds are increasing that “financial reform” legislation will pass this year,although there are broad differences between the House and Senate bills andfurther compromises are likely in the Senate.3.Much of this legislation addresses the issue of systemic risk and the “too big tofail” phenomenon. Detailed provisions address: (1) the powers and jurisdictionof the Federal Reserve, the FDIC, the SEC, the OTS (which will be abolished);(2) “resolution authority” to permit the early liquidation of an insolvent, butsystemically significant firm; (3) the credit rating agencies; (4) hedge fundregistration; (5) asset-backed securitization; (6) over-the-counter derivatives;and (7) a consumer protection agency.4.Today, I will address none of these; instead, I intend to focus on what hasreceived less attention: the corporate governance/executive compensationprovisions in this legislation.Slide 2
 
PROXY ACCESS1.Probably the most controversial change in corporate governance proposed by thecurrent financial reform is that set forth in Section 972 (“Proxy Access”) of the DoddBill, which authorizes the SEC to adopt rules (1) enabling shareholders to submitone or more nominees for inclusion in the corporation’s own proxy statement forelection by the shareholders to the board of directors, and (2) specifyingprocedures for proxy access.2.There was a small shift in the latest draft of the Dodd Bill, as it no longer mandates,but instead only authorizes, the SEC to “issue rules permitting the use byshareholders of proxy solicitation materials supplied by an issuer of securities forthe purpose of nominating individuals to membership on the board of directors ofe ssuer, uner suc erms an conons as e ommsson eermnes are nthe interest of shareholders and for the protection of investors.”3.Although this language is unqualified, the SEC is currently considering onlywhether to authorize a minority slate of 1,2 or 3 directors (depending upon the sizeof the board) if a requisite threshold percentage of shareholders (between 1% and5% depending on the size of the issuer) joined in the nomination.4.This reform is intensely controversial within the business community. Although theSEC is divided, it is still likely to approve some form of proxy access by a 3-2 party-line vote.Effective Date: The SEC Must Issue Rules Within 180 Days of Enactment.
Slide 3

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