Millstein Center Brokers Roadmap to Restoring Capital Market Integrity in Letter to White House

New Haven, Conn. June 11, 2009 – A letter proposing broad-reaching reforms for the U.S. capital market, was sent to the White House yesterday by a number of high-level economic thought-leaders and practitioners including former SEC Chairmen and Commissioners, Treasury and World Bank officials, and Yale officials and professors. The letter distinguishes between, and proposes, immediate “shovel-ready” reforms and long-reaching regulatory and structural overhauls. All of the reforms are geared to enhance accountability and transparency and to build a lasting oversight structure.

"The financial crisis has given rise to broad consensus that robust reforms are required to restore public, investor, and global confidence in the United States capital market — from business practices to regulation. Various interests are pressing for speedy overhauls. But America's capital markets are the core of savings, investment, and job creation. We cannot afford to get the required changes wrong. The American people expect intelligent market reform," state the authors of the letter.

The letter proposes the following immediate-action agenda:

• More thorough oversight of hedge funds and private equity;
• Better standards for, and broad reform of, the credit rating industry ;
•  Authorizing new regulation of mortgage brokers and consumer credit matters; 
• Protecting new “access” rules crafted by the SEC so that they are protected under federal law; 
• Mandating ‘say on pay’;
• Establishing independent, non-executive chairmanship of corporate boards (upon succession) as the preferred model, with "comply or explain" for all other models;
• Creation of a permanent commission to develop, oversee, and continually renew a U.S. code of corporate governance best practice principles; 
• Merging the Commodity Futures Trading Commission into the SEC; 
• Ensuring, through the Department of Labor, that America’s retirement savings plans embrace the highest levels of accountability and disclosure, and that the funds act as engaged owners at portfolio companies.

Additionally, the signatories call for reforms on systemic risk to be linked to the ongoing work of the Financial Crisis Inquiry Commission, and that the Commission should be regarded much like the 1933 Pecora Investigation, which laid the foundation for broad market reforms following the 1929 Crash. The Commission’s work should not only be able to identify underlying failures in practice and regulation, but point the way to solutions to today’s problems.

Proposal signatories include, in addition to several Yale officials and faculty, the following:

• Roger Altman, Co-Chairman and CEO, Evercore Partners, Inc.; Fmr. U.S. Deputy Treasury Secretary
• William H. Donaldson, Chairman, Donaldson Enterprises; Fmr. Chairman, U.S. Securities and Exchange Commission; Founding Dean, Yale School of Management
• Harvey Goldschmid, Dwight Professor of Law, Columbia University; Fmr. Commissioner, U.S. Securities and Exchange Commission 
• Arthur Levitt, Senior Advisor, The Carlyle Group; Advisor, The Goldman Sachs Group, Inc.; Fmr. Chairman, U.S. Securities and Exchange Commission 
• Ira Millstein, Senior Partner, Weil Gotshal and Manges; Senior Associate Dean for Corporate Governance, Yale SOM 
• James Wolfensohn, Chairman, Wolfensohn & Company; Fmr. President, World Bank

"The signatories do not intend that planning for systemic risk regulation be delayed, simply that the planning take advantage of the ongoing work of the Financial Crisis Inquiry Commission," said Ira M. Millstein, Senior Partner, Weil Gotshal & Manges; Senior Associate Dean for Corporate Governance, Yale School of Management.

The group of signatories asserts that the thoughtful building of a proper new "built to last" system will restore long-term confidence; reduce risks of future meltdowns; respond better to modern market needs; and provide better oversight of financial services, insurance, and self-regulatory organizations.

The signatories advise that the White House and Congress agree on a timetable to address broad regulation reform and systemic risk regulation, and that the timetable be linked to the work of the Financial Crisis Inquiry Commission's research and hearings, as well as on input from counterparts in other jurisdictions around the globe.

The letter, and its reforms, was released at the fourth annual Yale Governance Forum, taking place in New Haven on June 11 & 12, 2009.

ABOUT THE CENTER

The Millstein Center for Corporate Governance and Performance at the Yale School of Management continues to serve as the leading global resource for testing, challenging, and advancing the premise that corporations should, and can, serve society. The Center focuses on the inter-relationships of management, the board of directors, shareholders, and stakeholders in creating long-term corporate and shareholder value in today’s complex and competitive economy, while at the same time meeting the heightened expectations of society. The Center’s mission is even more relevant and crucial in light of the recent financial crises and corporate governance failures. Its efforts are currently directly related to improving the corporation’s capacity to deal with strategies and risk containment.

The Yale Governance Forum, the Center’s annual conference, is a crucial venue which aims to foster dynamic discussion. Our mission is to promote practical recommendations for the future based on the input of people who “are there and doing it.” The 2009 Forum consists of four plenary sessions and eight topic specific sessions, which will provide the opportunity for in-depth discussion of current key topics. It will allow participants to meet and interact with fellow practitioners and leaders. The goal of the Yale Governance Forum is never merely to engage in surface discussion, but to identify and explore key issues which will affect policy and action in the future.

Contact:

Ira Millstein, Senior Associate Dean for Corporate Governance, Yale School of Management; Senior Partner, Weil Gotshal and Manges
+1 212 310-8100

Stephen Davis, Senior Fellow & Lecturer, Millstein Center for Corporate Governance and Performance
+1 203 432-8070; +1 617 230-2277 (mobile)