Risk & Compliance

Pitt Lambastes SEC Board-Nomination Plan

Parts of the proposal, which would enable large institutional investors to have a say in picking directors, are ''silly and dangerous in the extrem...
Stephen TaubApril 30, 2004

Harvey Pitt, the former chairman Securities and Exchange Commission, has criticized the SEC’s plans to give some investors a greater voice in nominating candidates to companies’ boards of directors.

In a speech several days ago at a conference hosted by Compliance Week, Pitt — a columnist for the magazine and the chief executive of Kalorama Partners, a strategy-consulting firm based in Washington, D.C. — called parts of the proposal “silly and dangerous in the extreme.”

Last fall, the SEC proposed new rules that would enable large investors to take part in the nomination of corporate directors. The commission held a roundtable discussion on the subject earlier this year after receiving many comment letters, and it is expected to issue its final rules as early as May.

The Business Roundtable, an association of chief executive officers, has vehemently opposed the rules, arguing that they could disrupt even the best-run companies. For his part, Pitt argues that since the proposed rules favor larger institutional investors, that group would have too much power compared with small, individual investors.

Pitt also said he doubts that institutional investors would make the same exhaustive search for nominees that board nominating committees commonly conduct, according to the Financial Times.

Noting that many institutional investors, such as state pension funds, are run by politicians, Pitt reportedly added, “I think we will all be better off if we were spared the extension of our flawed political system to our corporate boardrooms.”

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