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The Unlikely Hardnose At The SEC


Showing a visitor around his airy office at the Securities & Exchange Commission, Chairman Christopher Cox breezes past photos of his family to pick up a framed check for $3.36 made out to "C.C. Cox." Dated Dec. 15, 1944, it is all the restitution the SEC chief's grandfather received after losing securities worth $6,000 in Insull Utility Investments Inc. Insull, the Enron of its day, collapsed in the 1930s -- a debacle that fueled the drive to create the SEC.

For Cox, the weathered memento is a touchstone. "My grandfather, who died a few years before I was born, framed the check because it was worth more as a painful lesson," the chairman says. "It serves as a reminder that the SEC's mission of investor protection is about individual Americans, their life savings, and their hopes and dreams."

So much for the widely held assumption that Cox, a Southern California Republican who steadily supported business interests for 17 years in the House, would loosen the reins on Big Business. Since his arrival at the SEC in August, Cox has championed investor protections. He resisted pressure to roll back key reforms for mutual funds, hedge funds, and employee stock options. And insiders say he has voted consistently to impose tough penalties on wrongdoers. Next, on Jan. 17, the SEC chief will unveil proposals that would force companies to spell out top executives' pay, perks, and retirement benefits in clear dollar terms.

Shareholder advocates are delighted by Cox's unexpected investor-friendly moves. "I have been pleasantly surprised on a number of fronts," says Barbara Roper, director of investor protection at Consumer Federation of America.

Cox insists he hasn't changed his stripes. He says his tell-all pay rules are in sync with free-market principles. "Fighting for better information for investors is entirely consistent with the promotion of economic growth," he says. Cox, 53, has no instinctive sympathy for megabucks CEOs. Some 20 years after he left his lucrative practice in securities law, he earned $162,100 in the House and makes less -- $149,200 -- as SEC chief.

"MORE GIVE AND TAKE"

The former congressman's political skills have pulled his four colleagues into accord. Under his predecessor, William H. Donaldson, Republican Commissioners Paul S. Atkins and Cynthia A. Glassman rebelled against what they saw as overkill in regulation and enforcement. Agency insiders say Cox works assiduously to build consensus, casting a wide net for ideas. "There's much more give and take" in discussions, says Atkins. Under Donaldson, 8 to 10 officials attended the weekly senior staff meetings on Tuesdays at 8:30 a.m. Cox has opened the sessions to more than 20 aides.

To bridge a partisan divide over whether the SEC should fine corporations, Cox let commissioners hash out the issues for hours. The upshot: unanimous agreement to seek penalties when a company has profited from its violations and when punishment could deter other companies. Still, the principles are general enough that specific cases could remain contentious. "There's a fair amount of fudge there," says former SEC Commissioner Harvey J. Goldschmid.

Not enough to satisfy business critics, who complain that the agency rides roughshod over corporate defendants. And Cox can expect business to balk at his bare-all CEO pay proposals. A key sticking point will be a mandate to assign a total dollar figure for retirement and severance packages. "There's concern that the numbers will be viewed as set in stone rather than as estimates based on assumptions," says Mark Borges, a principal at Mercer Human Resource Consulting LLC.

To maintain his investor-friendly image, Cox needs to follow through. He also must fill key jobs at the agency, picking top overseers for mutual funds, stock trading, and financial disclosure, as well as naming a new head for the accounting oversight board. But by starting out on a pro-shareholder note, Cox has earned goodwill that could help him cut business some slack later.

By Amy Borrus, with Mike McNamee in Washington


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