Buffett, other stars discuss competition
Treasury Secretary, SEC Commissioner gather with CEOs to discuss the future of American markets and how to make them attractive to global firms.
WASHINGTON (CNNMoney.com) -- A dream team of American business and government pushed Tuesday for changes in regulations they say are necessary to keep U.S. financial markets from falling behind the rest of the world.
Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox moderated all-star panels that included investment guru Warren Buffett; former Federal Reserve chairmen Alan Greenspan and Paul Volcker; New York Stock Exchange (Charts) CEO John Thain; former Treasury Secretary Robert Rubin, New York City Mayor Michael Bloomberg; and the CEOs of JPMorgan Chase (Charts) and General Electric (Charts).
The proposals being discussed include a blueprint laid out Monday by a committee of the U.S. Chamber of Commerce. Proposals included giving the SEC the authority to exempt some companies, especially smaller firms and overseas companies, from some aspects of the Sarbanes-Oxley Act, passed in the wake of the accounting scandals at Enron and WorldCom.
Most of the early panel participants said they weren't looking for a widespread rollback of the post-Enron rules, although just about all said the rules caused significant wasted effort and cost by companies.
"Most of my friends are not overly happy, but to some degree they've brought it on themselves," said Buffett.
Buffett said that as a CEO "we are doing a lot of things I regard as unnecessary."
But he also said that as an investor he likes seeing the most details possible from other companies.
"I have an enthusiasm for reading reports. It's like a teenager reading Playboy. At 76, you have to get excited about something," Buffett said.
Overseas market strength
The Chamber of Commerce is arguing that global companies are choosing to list on overseas markets rather than U.S. exchanges, which they say poses a risk to the U.S. economy long term.
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The chamber proposal also called on corporate America to make changes in the way it does business, including no longer issuing quarterly earnings guidance, in order to move away from a focus on short-term results rather than long-term strategic moves and investments.
It also called for changes in the structure of 401(k) plans and other employer-based investments to make it easier for American workers to invest for retirement.
But the proposals from the chamber did not include any of the corporate governance issues being pushed by some shareholder rights groups such as changes in the way that directors are elected or the ability of shareholders to challenge executive pay or other compensation.
And the chamber's proposal to limit some legal liability for corporations and their outside auditors was quickly attacked Monday by plaintiff lawyers.
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"I've seen no benefits for individual investors and only limited benefits for the litigants," said Charles Schwab (down $0.25 to $18.21, Charts), founder of the retail brokerage firm, and one of the morning participants.
But some panelists said the problems caused by lawsuits were overstated. Anne Yerger, executive director of the Council of Institutional Investors, said that securities litigation has dropped steadily over the last ten years.
Former SEC Chairman Arthur Levitt agreed with Yerger's assessment.
The executives on the panel also voiced concern about the role of outside auditors post-Enron and the demands on the audit committees of corporate boards.
"Once upon a time there was a thing called independent auditors and they were relied upon," said GE Chairman and CEO Jeff Immelt.
He said that the legal action against former accounting firm Arthur Andersen has made auditors apply rules too strictly without any consideration of what would give the most accurate picture of a company's results.
"There has to be judgment applied," he said.
But SEC Chairman Christopher Cox said it is difficult to meld both accounting principles and rules.
"This debate about principles versus rules is like 'Tastes great versus less filling.' Ideally, you want the best of both," he said.
NYSE CEO John Thain voiced concern about U.S. markets losing IPOs to overseas markets. He said that only two of the 25 largest IPOs last year were in the United States.
But Yerger and some other participants said that's more a sign of the maturation of overseas markets than a lack of competitiveness of the U.S. system.
"Ninety percent of companies are now listing in their local markets," said Yerger. "I don't think that's a trend we can overcome."
She argued that if the regulatory demands on corporations changed in the name of keeping U.S. markets competitive globally, then shareholders' rights needed to be improved here as well.
Yerger said some overseas markets allow shareholders greater chance to vote on executive compensation, to direct their votes for directors, and to have access to the proxy.
"We need to be considering them," she said of those rights.
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