SEC Commissioner Peirce: Protect Investors, Maximize Financial Value
Commentary by Steven Lofchie
SEC Commissioner Hester M. Peirce outlined seven steps for both the SEC and public companies to refocus on their core missions. She warned against a "hazardous regulatory, political, and societal landscape" that distracts from "maximizing long-term financial value" and investor protection.
Speaking before the Northwestern Securities Regulation Institute, Ms. Peirce emphasized that the SEC must resist pressures to extend its authority into contentious social and political issues and return to a materiality-based disclosure regime. She laid out seven steps for returning both public companies and the SEC to a more stable foundation:
- Refocus on Core Missions. Public companies should prioritize maximizing long-term financial value, avoiding "pet projects for executives" or catering to "the loud hawkers of the controversial issue du jour." Similarly, the SEC should focus on protecting investors by facilitating material, cost-effective disclosures.
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Protect the Disclosure Regime. Ms. Peirce cautioned against those who would commandeer the SEC's disclosure regime to serve non-investor constituencies, such as climate consulting firms or labor interests. Materiality "from the perspective of the reasonable investor" must remain the guiding principle for corporate disclosures.
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Stop Pressuring Asset Managers. Ms. Peirce argued that current proxy voting disclosure requirements expose asset managers to pressure campaigns from activists. Ms. Peirce called for asset managers to focus solely on fiduciary duty to fund shareholders, free from external political or social scrutiny.
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Reform Shareholder Proposal Rules. Ms. Peirce argued that environmental and social proposals are "expensive corporate diversions" that shift management's focus away from value creation. She advocated for raising ownership thresholds under Rule 14a-8 ("Shareholder proposals") to ensure proponents have a meaningful economic stake in companies.
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Limit Management Through Enforcement. Ms. Peirce criticized the SEC's use of enforcement actions to impose controls unrelated to financial disclosures, calling it an "inappropriate extension of the agency's authority." She warned against enforcement becoming a tool to "nudge companies to manage themselves according to the metrics the SEC finds interesting at the moment."
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Strengthen Guidance for Public Companies. Ms. Peirce urged the SEC to provide more dynamic and interactive guidance on disclosure issues. She stressed that this engagement would restore confidence in offering timelines and help public companies navigate complex regulations.
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Depoliticize Capital Markets. Ms. Peirce argued that capital markets must "function in a way that is agnostic to the party in power," warning against weaponizing financial regulation to serve political ends.
Commentary
Commissioner Peirce's statement is consistent with the mantra commonly identified with the man long admired as one of the great philosophers and leaders of our time: "Do Your Job" (Bill Belichick).
During the past administration, financial regulators have had their attention diverted from their core congressionally mandated missions to a host of social and political causes, for which they have neither authority nor competence. The result is that these regulators have failed to do their jobs or effectively advance these interests. Instead, many of these interests have been discredited as excuses for the regulators' failures in their core missions. (See e.g. HFS Leaders Criticize PCAOB Proposal to Expand Auditors' Responsibilities with commentary.)