ATR Opposes H.R.1611, the Gender Diversity in Corporate Leadership Act of 2017

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Posted by James Setterlund on Tuesday, July 10th, 2018, 2:20 PM PERMALINK

ATR President Grover Norquist sent a letter to Financial Services Chairman Jeb Hensarling (R-Texas) and Ranking Member Maxine Waters (D-Cal.) expressing his strong opposition to Rep. Carolyn Maloney’s (D-N.Y.) Gender Diversity in Corporate Leadership Act, H.R.1611.

Maloney’s legislation would task the SEC with the creation of a ‘Gender Diversity Advisory Group’ to “study strategies for increasing gender diversity among the members of issuers' boards of directors.” Additionally, HR 1611 would provide the SEC with rule making authority to require additional information already publicly available with the threat of enforcement if companies choose to alter their current practices of providing this information in their proxy statements to shareholders.

Maloney and fellow Democrats ignore the fact that the composition of board members is publicly available information and commonly voted on by shareholders. Their political virtue signaling is nothing more than attempt to open the door for government involvement in the social responsibility of private enterprise. As is the case with the SEC collecting information on the compensation of CEOs as a result of Dodd-Frank.

This kind of activist agenda being pushed may actually have a negative impact on shareholders return on investment, to whom the CEOs and boards of directors have a fiduciary responsibility to protect. In a 2014 Harvard Law report, the authors explain how the reliance on proxy firms’ recommendations for executive compensation can influence how corporate boards act and decrease shareholder value.

If the company and their shareholders agree and choose to put forward efforts to promote social causes ahead of their return on investment, they do so at their own discretion. In no way should bureaucrats at the SEC be in the businesses of compelling companies to engage in these practices for fear of punishment.

The proposed legislation takes the SEC wildly out of their purview of regulating securities markets, protecting against fraud and abuse from bad actors and will waste valuable time and resources. When a door opens, government has a tendency to go through the door, and remain in the marketplace, making it harder to be reversed. Congress should keep this door closed and vote against Rep. Maloney’s legislation.

The full letter can be found here and below.

 

July 10, 2018

 

The Honorable Jeb Hensarling, Chairman
House Committee on Financial Services
2129 Rayburn House Office Building
Washington, D.C. 20515
 

The Honorable Maxine Waters, Ranking Member
House Committee on Financial Services
2129 Rayburn House Office Building
Washington, D.C. 20515
 

Dear Chairman Hensarling and Ranking Member Waters:
 

I write in strong opposition to H.R. 1611, the Gender Diversity in Corporate Leadership Act of 2017. This legislation falls well outside the intended purpose of the Securities and Exchange Commission’s mission and does nothing to protect investors.

Under Dodd-Frank’s “Miscellaneous Provisions,” or Title XV, there has been a concerted push by some in Congress to compel the SEC to become an activist agency by forcing companies to disclose mine safety violations, resource extraction in countries abroad and “conflict minerals originating in the Democratic Republic of the Congo.” Instead, the agency has to dedicate staff and resources to monitoring these issues instead of properly using staff to oversee financial markets and protect against fraud as intended with its creation.

This legislation in essence adds to Title VX of Dodd-Frank by continuing the practice of inserting the government in between private enterprises and their shareholders. Additionally, this provides the SEC with rule making authority to require additional information already publicly available with the threat of enforcement if companies choose to alter their current practices of providing this information in their proxy statements to shareholders.

I am concerned that H.R. 1611 also leaves the door open for future legislation that would further obligate the SEC, or any other government agency, to engage in social rule making and demand companies to adopt practices that decrease shareholder value for political purposes.

If companies wish to engage in practices that promote social causes, it should be for them to decide, free from government intervention. For these reasons, I urge members of this Committee to vote against H.R. 1611 and I encourage free market supporters to do the same.

Sincerely,
 

Grover G. Norquist
President
Americans for Tax Reform

 

Photo Credit: Securities and Exchange Commission

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