I was at Safeway last week when a group of shoppers mistook
me for Harvey Pitt, Chairman of the Securities & Exchange
Commission. Pitt is heavyset, middle-aged, with dark hair, and a
beard. You know, a heartthrob. Mind you, I am younger, with a
goatee, and I wore a Hawaiian shirt and sunglasses, rather than a
dark suit and horn-rims.
Since moving to Arizona, I have been mistaken for Dylan
Thomas, John Belushi, Buddha, and Elvis. It was refreshing to be
confused with someone living, but these people weren’t
fans. They wanted to complain. And then they threw fruit at me.
(Lucky for me this encounter didn’t take place at my previous stop,
Home Depot.)
Harvey and I go back to his days as a partner of Fried,
Frank, Harris, Shriver & Jacobson. Senator Schumer referred to
Pitt at his confirmation hearings as a “Zeus” in the field of
securities regulation. I represented shareholders in securities
class actions, so it wasn’t like we were buddies, but I thought I
could help us both, so I wrote him:
Dear Harvey:
You probably don’t remember me. I’m the guy who got thrown out
of your firm’s offices in 1988 for stealing legal pads and FedEx
airbills while attending a deposition. As I was reeling in panic
from the security guard’s pepper spray, I thought I saw you — out
of the corner of my uninfected eye — close a conference room door.
If that was you, I’m sure you noticed that, minus the ugly red
splotches covering my face from the spray, we could almost be
brothers.
We both know what ails the markets, and it’s not just a slow
economy. The system has been poisoned, and it’s not worth arguing
whether there were ten bad companies or a hundred. Leading former
CEOs of moribund companies off in handcuffs or watching the media
and Congress conduct corporate witch-hunts won’t do it. In fact,
those things undermine confidence in the market because with each
new detail, investors ask, “How much more is there that I don’t
know?”
Obviously, you had to change the original game plan of
reducing the amount of securities regulation. It’s clear,
though, that your heart just isn’t in it. You are too smart to be
satisfied with half measures, and we’ve both been pelted with fruit
enough to know it’s not working.
You have two choices, Harve: keep plodding along until you
disappear into obscurity or become well-known enough to be made fun
of by Jay Leno, or pull an Earl Warren and become The Regulator Guy
of the modern stock market.
I say, go for it! Announce immediately that the SEC is beginning
rulemaking for the following:
(1) Closing down the window between the quarter- and year-end
and filing dates for financial statements. It is currently 60 days
after the quarter and 90 days after the end of the year. Change it
to 15 and 30.
(2) Closing down the window between when insiders can sell
shares in their companies and when they have to disclose it. Get
behind those crazy proposals that cut the time from months down to
a couple days.
(3) Making those auditors earn their millions. Instead of that
form letter they attach to a company’s annual report, they have to
write an audit report, describing the audit, pointing out risk
factors, and documenting all disagreements. (As a bonus, make them
immune from civil suits based on matters they identified as risk
factors.)
(4) Developing a short-form financial statement in addition to
the current required forms. Investors need something easy that they
can trust. The short-form should be one page, and include earnings,
debt structure, cash flow, and officer-and-director
compensation.
The Administration will claim you’re a lose cannon. Companies
will hit the roof over all these additional filing requirements.
Auditors will gripe about the extra work and the uncertainty.
Then you know what will happen? You will become a hero. The Left
will love you for your independence, and for using your expertise
to make companies and auditors issue trustworthy, understandable
reports. The Right will love you because, as the mid-term elections
near, the Administration will be claiming the high ground on
restoring investor confidence. Let the Democrats grandstand about
the evils of wealth and the excesses of former CEOs. The
Republicans are the ones willing to fix the system and declare it
safe for investors to return to the marketplace.
Finally, you will become a hero to business. The first two
proposals merely bring the rules up to date with technology. The
short-form won’t require additional disclosures — just a “Cliff
Notes” for investors. This package also focuses on the future, and
it takes the heat off a lot of CEOs who are trying to do a good job
but would prefer if everyone glossed over their past peccadilloes.
The auditors will end up thanking you. Not only will these reports
demonstrate that the audit firms are actually earning their
millions, but they can probably run the meter a little more in the
process of preparing them.
If I’m wrong, resort to Plan B: hop a flight to Phoenix, hang
out at my condo, pretend you’re me at Ancala Country Club, and work
on your golf. These are my ideas, so I’ll take your place in
Washington. I’m thirteen years younger than you, but if this plan
fails and I have to take the heat, the experience should age me in
no time.
Yours truly,
Mike
P.S. If you don’t do any of this and you’re still on good terms
with Chuck Schumer, ask him if he can make throwing fruit into a
felony, for both our sakes.
