In a speech given Friday to the Society of Corporate Secretaries & Governance Professionals, Securities and Exchange Commissioner Troy Paredes warned that the Dodd-Frank financial reform law “represents a historic expansion of the federal government’s power over the economy.”
Paredes said quite directly, “I have been and remain troubled that the Dodd-Frank regulatory regime goes too far.”
While the Bush-appointed commissioner concedes that there is a role for government regulation of financial institutions — the SEC being part of that role — he contends that the law will “prove to be excessive, unduly burdening and restricting our financial system and suppressing private sector innovation, entrepreneurism, and competition at the expense of our country’s economic growth and global competitiveness.”
“My concern that we are overregulating is accentuated when instead of evaluating each rule and regulation one-by-one, the totality of the regulation that the private sector must bear is added up,” Paredes said.
Dodd-Frank was signed into law in 2010 after passing the House and Senate in largely partisan votes.
“Whatever the policy differences might be, however, there should be widespread agreement over this,” said Paredes. “That we need to carefully evaluate whether the intended goals of our actions will be achieved; and that we need to identify and give due regard to the possible undesirable effects and unintended consequences of our choices.”
“In other words,” he said, “the SEC must engage in rigorous cost-benefit analysis — rooted in economics and the available data — when fashioning the securities law regime.”
The SEC writes the rules required by Dodd-Frank, many of which are already in effect.
Paredes spent a large part of the speech discussing executive compensation.
He warned that a one-size-fits-all approach for executive compensation fails to acknowledge individual company structures, undermines the “enterprise’s own attributes and qualities” and can misalign incentives.
“Not only is it important for regulators to recognize that one-size-fits-all governance and pay practices don’t work so well for most companies,” Paredes said. “But board members, officers, investors, and other corporate constituencies also should recognize that each company is unique.”
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