US losing its leading international competitive position
London Business School and other eminent finance professors propose new initiatives for the US roundtable statement
Professors Elroy Dimson and Stephen Schaefer of London Business School have contributed to a Statement by the Financial Economists Roundtable (FER) addressing the issue of whether the US is losing its leading competitive position as compared to stock markets and financial centre abroad, and what to do about it.
The FER Statement, released on 7 September 2007, makes four policy recommendations relating to securities class action suits; shareholder rights; compliance costs associated with SOX §404; and maintaining open markets. The Statement responds to an Interim Report released in November 2006 by the Committee on Capital Markets Regulation (“Paulson Committee”) and a subsequent report prepared by McKinsey & Co. which addressed concerns about the US losing its leading competitive position internationally.
Recommendations of Financial Economists Roundtable Statement:
1) Securities class action suits -- Abolish enterprise liability under rule 10b-5 in situations arising out of security purchases and sales in the secondary trading market among outside shareholders, while retaining managerial and firm liability where the company itself or its insiders (officers and directors) transact to their own benefit.
2) Shareholder rights -- Require all corporations to obtain shareholder approval to adopt a poison pill, regardless of whether a company has a staggered board.
3) Compliance costs associated with SOX §404 -- Adopt a statutory amendment that makes it optional for a company to adopt the §404 procedures for a management assessment and auditor attestation of the effectiveness of its internal controls, with the requirement that if the company chooses not to comply it must explain why in its financial statements.
4) Maintaining open markets -- Allow both foreign and U.S. firms to choose to report in conformity with either IFRS or US GAAP.
The Financial Economists Roundtable is comprised of distinguished senior financial economists, who have made significant contributions to the finance literature and seek to apply their knowledge to current policy debates.
The Roundtable focuses on microeconomic issues in investments, corporate finance and financial institutions and markets, both in the US and internationally. Its major objective is to create a forum for intellectual interaction that promotes in-depth analyses of current policy issues in order to raise the level of public and private policy debate and improve the quality of policy decision.