The Market Place

The SEC will implement rules regarding executive compensation. The rules are needed to allow full disclosure to the investing public, but some over zealous administrator might try to write in a more substantive law that will limit executive compensation. I believe Chairman Cox will not allow this because one, the SEC is mandated by Congress to regulate the capital markets and is basically an agency the enforces disclosures by companies. Two, the creation of a corporation is through state law and a Republican Congress will want to support federalism. Three, the Supreme Court may hand down a judgment stating the SEC has overstep its bounds by interfering with states rights to promulgate laws regarding the creation of a corporation, the right of those entities to contract without government interference, and SEC does not have the authority granted by Congress to issue a substantive rule to regulate executive compensation.

Any time there is a great scandal or turmoil, politicians are quick to act. Although, their intentions are good the final product hastily passed might do more harm than good. For example Sarbranes-Oxley was needed to straighten out proper accounting rules and to add the potential of criminal punishment for executives of corporations. However, the onerous and convoluted law and rules that were passed have cause a tremendous cost to corporations listed in America and has resulted in many foreign companies seeking to list on less regulated foreign exchanges. I hope the SEC realizes the with the implementation of the new executive compensation disclosure rules that they stick to disclosure and not attempt to regulate the actual compensation.