As has been expected, the issue of corporate governance came to the forefront last week, with an SEC proposal on Shareholder Access and Senator Schumer’s introduction of a Shareholder Bill of Rights. We will discuss these issues in great detail over the coming weeks, but I just wanted to recap where the Chamber has been on these issues.

On February 6, 2009, the Chamber sent a letter to Treasury Secretary Timothy Geithner (with copies going to every member of Congress) outlining a set of principles for effective Corporate Governance, Investor Responsibility and Executive Compensation. These principles include:

• Corporate governance policies must promote long-term shareholder value and profitability but should not constrain reasonable risk-taking and innovation.

• Long-term strategic planning should be the foundation of managerial decision-making.

• Corporate executives’ compensation should be premised on a balance of individual accomplishment, corporate performance, adherence to risk management and compliance with laws and regulations, with a focus on shareholder value.

• Management needs to be robust and transparent in communicating with shareholders.

The letter also included principles for advisory Say on Pay votes on executive compensation. These principles stated that Say on Pay resolutions should be advisory, periodic (once every three years) and provide ability for shareholders to approve an opt-out of Say on Pay.

Last month, the Chamber sent a letter to SEC Chair Mary Schapiro in advance of the Commission’s proposal on shareholder access. The Chamber letter reiterated that these were matters under the jurisdiction of state law and that the SEC lacked the legal authority to act.
However, the Chamber did request the SEC to take action in areas where they have the authority, such as increasing disclosure and increasing proxy voting participation.

Last week, the Chamber issued a Navigant study of 166 shareholder proposals key-voted by the AFL-CIO. This study showed that these proposals did not increase shareholder value in the short-term or long-term. A fundamental truism of investing is to make a return on your money. Clearly, activist agenda proposals miss the mark on that truism as well as the principles developed by the Chamber.

We took these steps knowing that Corporate Governance would be a battle ground. Public corporations have been the backbone of the American economy for the past 150 years. Recently, in the heat of debate we have seen a willingness to throw the baby out with the bath water. That is a price that businesses and workers can ill afford to pay.

The SEC proposal and the Schumer bill are misguided. But if we are going to have a debate, let’s have one that is thoughtful and rational. The stakes are too high and we have to get it right. The alternatives are too grim to contemplate.