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What does the SEC, a securities regulator, have to do with corporate governance?

You might be thinking corporate governance relates to a company's board of directors or management, or it's a matter of state law. And you'd be right. But there's more to this story.

When the SEC was formed 90 years ago, a lot of things had broken down. The stock market, of course, had broken down, but so had matters regarding corporate governance.

Shortly after the 1929 market crash, there was a series of blockbuster Congressional hearings that uncovered widespread abuses by executives of big banks, and utility companies, and investment funds. In essence, the executives had lined their pockets, at you the investor’s, expense, and bad corporate governance was part of the problem.

So, shortly thereafter when Congress created the SEC, Congress determined that, as part of our role, we should play a part in corporate governance. Now, this role would stand alongside the state laws, the boards of directors, the management.

Over the decades, in response to yet more corporate governance failures, Congress has given us a number of additional authorities related to this area. And these authorities, taken together, relate to four things.

First, disclosures from issuers about their corporate governance itself. Second, provisions relating to corporate governance that help enhance the integrity of all the other disclosures. Third, provisions about shareholder voting and acquisition of control of the issuers. And, fourth, provisions regarding executive compensation and importantly, ill-gotten compensation, including insider trading.

So, in the last three years, the SEC has taken up several initiatives to carry on our long tradition of corporate governance work.

First, we adopted a number of rules related to executive compensation. In our new clawback rule, for example, it ensures that executives don't keep paid compensation when it was based on an issuer hitting financial milestones that actually were not hit. Further, we finalized rules requiring companies to make disclosures to you, the investors, on the relationship between the company’s performance and what they get paid.

Second, we adopted amendments to rules to raise the bar for when insiders can trade in their own company’s stock.

Third, relates to proxy voting. We adopted rules regarding something called universal proxy, in essence, allowing investors to vote by proxy similar to how they would vote in person in picking and selecting amongst boards of nominees.

And then, lastly, we adopted rules to require more prompt disclosures by those who seek to buy large stakes in a company to affect control in those companies. These initiatives enhance corporate governance, and that's good for investors and issuers alike.