Monday, 19 March 2007

AFL-CIO calls for investor protection

The US unions have long been pioneers of capital stewardship. The AFL-CIO (the US equivalent of the TUC) is now lobbying Congress to carry out hearings on the continuing failures of US corporate governance and capital market regulation.

These hearings should address (1) executive pay excesses and the apparent widespread and flagrant legal violations involved in the stock options scandals; (2) the impact of the growth of hedge funds and private equity on the health of our capital markets and our economy overall; (3) the effect that corporate America’s retreat from providing pensions has on our system of corporate finance; and (4) the relationship of our increasingly regressive tax system to the explosion in executive pay, our growing budget deficit, and our inability to fund basic governmental obligations.

You can find the full statement here.

The business community in the US has itself been lobbying for a watering down of the Sarbanes-Oxley Act, the major piece of US corporate governance reform introduced in response to the likes of Enron and WorldCom. Some have argued that the Act is causing more companies to list outside the US to avoid the requirements of Sarbox.

But the Securities and Exchange Commission has come out fighting. In a speech last week the SEC chair Christopher Cox defended the Act and also pointed out that the decline in companies listing in the US predates the Act by some years.

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