The punch line: excessive regulation and transactional costs are making U.S. companies less competitive in global capital markets.
Sarbanes-Oxley reform is mentioned, although some say that issue is too hot of a political potato. (Or is it potatoe?)
This nugget warmed my heart (from the WSJ):
The report’s overarching theme is a change in regulatory philosophy. The revised philosophy is one based more on general principles than prescriptive rules, more aware of costs as well as benefits of new rules and less intrusive. It lauds Britain’s Financial Services Authority, which uses “principles”-based regulation and oversees all British financial firms, in comparison with the U.S.’s multiple federal and state banking and securities regulators.
The Wired GC studied philosophy and is a big fan of principles over rules. Why?
— You can never have enough rules.
Many members of Congress, and most regulators I have met, prefer rules. Rules need regs and regs need interpretive guidance and all that needs lawyers inside of government to legislate and promulgate. Then lawyers outside of government are needed to postulate and navigate.
A great example is the aforementioned Sarbanes-Oxley, largely a knee-jerk reaction to notorious financial shenanigans like Enron and WorldCom. But much of what happened in those cases was already actionable under current law. The business community (99%+ of whom try to do the right thing) gets punished for the misdeeds of the errant few.
If nothing else, the Committee report reminds people that it isn’t Fortress America any longer. Companies can go private, or organize or raise capital under laws of more market-friendly jurisdictions. Don’t think for a minute that many members of the Committee (with a heavy New York tilt) aren’t aware of the acsendancy of London as a premiere world capital market. Hence the mention of Britain’s FSA.
Former Goldman CEO and current Treasury Secretary Henry M. Paulson Jr., while not a member of the Committee, has already made these issues a priority.
The report, according to the New York Times, gets it right on the issue of corporate prosecutions:
The report calls on the Justice Department to change its policy on corporate prosecutions. That approach is contained in a memorandum by Larry Thompson, who was deputy attorney general when the corporate scandals erupted. At the moment, prosecutors, in determining whether to bring criminal charges against a company, are permitted to consider whether the company waived lawyer-client privileges to aid the governmentâ€™s investigation and whether the company is paying defense costs for current or former executives facing criminal charges.
Instead, the report said, the Justice Department should prohibit prosecutors from seeking waivers of lawyer-client privilege or the denial of legal fees for company officials.
Abusing privilege waivers, now there’s a real crime.
Lawyers on the 22 member Committee included Ira Millstein of Weil Gotshal and Thomas Russo, chief legal officer of Lehman Brothers.
The Committee also utilized a Legal Advisory Group:
— John Bostelman, Sullivan & Cromwell
— Adam Chinn, Wachtell Lipton
— Kris Heinzelman, Cravath
— Leslie Silverman, Cleary Gottlieb
— Jeffrey Small, Davis Polk
At least the Committee was able to find seven lawyers who really want reform…