SEC Commissioner Gallagher Remarks on the Proper Role of the SEC as to Corporate Governance

SEC Commissioner Daniel M. Gallagher delivered a speech before the Corporate Directors Forum, in which he discussed the proper role of federal government in the corporate governance realm.  In particular, Commissioner Gallagher asserted that the standard response to severe economic downturns or epochal corporate scandals is hurried and reactive federal legislation and regulation; and usually onerous, requirements as “feel good and cure all” responses to perceived problems.  According to Commissioner Gallagher, such legislation and its implementing regulations are rushed out without serious analysis of costs and benefits. Gallagher discussed the relationship between shareholders, management and boards of directors as well as the impact of legislation such as the Dodd-Frank Act. Gallagher also discussed the advantages of state regulation of corporate governance, coupled with the fact that the federal government, as demonstrated by Section 404 of Sarbanes-Oxley, has not been successful at predicting the costs and outcomes of federal corporate governance legislation. Gallagher recommended that the SEC should resist the urge to intrude upon state regulation of corporate governance absent compelling reasons to do so.

View speech in full here (links externally to SEC website).