In a recent speech to the American Enterprise Institute, SEC Commissioner Hester Peirce continued her rebuke of the practice of “public shaming” of companies that do not adequately satisfy environmental, social and governance (ESG) standards—hence the title of her speech, “Scarlet Letters.” According to Peirce, in today’s “modern, but no less flawed world,” there is “labeling based on incomplete information, public shaming, and shunning wrapped in moral rhetoric preached with cold-hearted, self-righteous oblivion to the consequences, which ultimately fall on real people. In our purportedly enlightened era, we pin scarlet letters on allegedly offending corporations without bothering much about facts and circumstances and seemingly without caring about the unwarranted harm such labeling can engender. After all, naming and shaming corporate villains is fun, trendy, and profitable.” Message delivered.
Happy International Women’s Day! To celebrate, let’s hear from Hester Peirce, the only woman SEC Commissioner. (Irony intended.)
In a speech delivered a few days ago to the Council of Institutional Investors, after expressing her gratitude for those contributions by CII to the public debate that Peirce views favorably (regarding proxy voting, stock buybacks and disclosure reform), she takes the opportunity to “air her grievances,” citing as a model Seinfeld’s 1997 Festivus episode. (“I got a lot of problems with you people, and now you’re gonna hear about it.”) What’s her complaint? It’s the focus of CII and other investors on what she views to be “non-investment matters at the expense of concentration on a sound allocation of resources to their highest and best use. Real dollars are being poured into adhering to an amorphous and shifting set of virtue markers.” And the pressure on the SEC “to get on the bandwagon and drag others with us is pretty intense. We are being asked more and more to shift securities disclosure to focus more on matters that do not go to an assessment of how effectively companies are putting investor money to work.”
As has been widely reported, there are currently two nominees to fill the two empty slots at the SEC—from the Democratic side, Robert Jackson, a professor at Columbia Law School, and from the Republican side, Hester Peirce, a fellow at George Mason University. However, Senator Tammy Baldwin had put a “hold” on the nominees back in November, as reported in the WSJ, until they provided “their views on whether regulators should rein in activist investors, stock buybacks and executive pay.” Now that they have both responded to her questions, Baldwin has lifted her hold on the nominees, according to Law360, “clearing a hurdle for confirmation.” Their responses, although not exactly surprising, provide some insight into their views on these key issues.