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Financial Times, January 16, 2007 article


Democrats look to boost investor rights
By Jeremy Grant in Washington
Published: January 15 2007 22:11 | Last updated: January 15 2007 22:11

Signs are emerging of a Democratic effort to boost shareholder rights in the US after a top lawmaker said he planned to hold “informational hearings” on the harmonisation of regulatory systems between the US and Europe.

Paul Kanjorski, the new chairman of the House of Representatives sub-committee on capital markets, insurance and government sponsored entities said “the time is ripe” to examine the issue.

He said if global markets were to grow and mature, “we have to start recognising some international standards”.

“It’s something I want to pay attention to because one of the things that ties in very closely is investors’ rights in corporations. I think Europe has shown that they have a greater investor right concept and it’s working fairly well,” he said in an interview with the Financial Times.

His call comes after Barney Frank, Democratic chair of the House financial services committee, said last week he planned to pass a bill by the summer that would “legislate greater shareholder involvement in setting CEO salaries”. Mr Kanjorski’s sub-committee operates under the financial services committee.

He said: “We’ve got some focus points now that [Mr Frank] is very much interested in executive salary. We’re really going to have to look at what rights should the shareholders have, and what is being done in the UK and Europe. We may find out just by adopting some of their systems within our system, if we can create a better control or transparency factor.”

European corporate governance experts have called for a better balance between shareholder rights and what they say is excessive use of litigation to settle corporate and boardroom disputes in the US.

The Securities and Exchange Commission is deadlocked over whether to proceed with a proposal allowing shareholder access to company proxies for the purpose of voting board directors – a move that would give shareholders more say in setting executive pay.

Mr Kanjorski, a 12-term Pennsylvania congressman, said his interest was broader than executive compensation. “Let’s look fundamentally at whether we have enlarged or protected shareholder rights in this country relative to the rest of the world. There’s a push to limit litigation. Maybe if we had better shareholder rights we wouldn’t have as much litigation.”

He said the US should examine the UK’s “principles-based” regulatory regime because there were “certain things over there that they are doing fairly well that we haven’t yet adopted in this country”.

“From what I understand their regulation is a lot keener. We have a tendency to stovepipe regulatory authority in the United States and they cross lines much more flexibly. They are pre-emptive and we’re ‘gotcha’. That can be very expensive,” said Mr Kanjorski.




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