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Environmental, Social, Governance (ESG)
16 December 2009

ECGI newsletter - 'The New Role of Government in Corporate Governance'

In the US and the EU there is growing momentum in favour of a much expanded regulatory outlook extending well beyond the banking sector and into areas of corporate governance, especially executive pay. The newsletter asks about the future policy perspective of government interventions.

With the recent financial crisis, governments on both sides of the Atlantic hold major ownership stakes in various banks and therefore playing a different role in the corporate governance debate. Transatlantic Corporate Governance Dialogue 2009 asked what the new role of corporate governance should be, not only in the companies that are now government owned but also through regulation in the economy in general. Mary Schapiro, Chairman of the SEC was one of the speakers.


Commissioner Schapiro set out the five key areas which the SEC is currently looking at with a view to reforming. These include curbing unfair trading practices such as abusive short-selling. She noted that the Commission also is considering other market structure issues, such as dark pools, alternative trading systems and high-frequency trading as well as proposed rules to ban flash orders, through which select traders see investors’ orders before they are sent to a wider marketplace.


Secondly, the SEC is working to improve the performance of those market intermediaries upon whom investors rely, such as ratings agencies and investment advisors, in particular looking at the so called “pay-to-play” practices by investment advisers to public pension plans. This summer the SEC proposed rules that are designed to prevent an adviser from making political contributions or hidden payments to influence their selection by government officials.


Thirdly Commissioner Schapiro discussed the Commission’s examination of the accountability of corporate managers to their owners.


Transatlantic Corporate Governance Dialogue in order to bring together leading academics from law, economics and finance, regulators, judges, law makers, corporate leaders, investors and other corporate constituencies to engage in forward-looking discussions of corporate governance issues that are or will be at the forefront of policymaking on both sides of the Atlantic. The Dialogue is endorsed by the European Commission.





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