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Corporate Governance and the SEC: The Impact of the Stimulus Bill (President Obama and the State of the Union) (Part 6)

By J. Robert Brown

So, was President Obama correct in his State of the Union of the following:

And I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. (Applause.) This time — this time, CEOs won't be able to use taxpayer money to pad their paychecks, or buy fancy drapes, or disappear on a private jet. Those days are over.

The amendments to TARP in the Stimulus Bill edge in this direction but do not guarantee that this will occur.  The legislation hardly touches fancy drapes and private jets.  It merely requires the boards of TARP participants to have a policy in place with respect to excessive expenditures in this area.  Nonetheless, as a practical matter, things are not as usual.  While boards could put in place policies that still allow for corporate aircrafts or expensive remodelings by the CEO, it is unlikely to do so.  The policies will likely be more restrictive than what is legally required (which, under Delaware law, is almost nothing). 

In other words, the practices will decline.  But to ensure that this occurs, the SEC needs to require companies to make those policies public.

Full post as published by The Race to the Bottom on March 02, 2009 (boomark / email).