October 30, 2020
Former Acting SEC Chairman Michael Piwowar outlined legislation targeting stock options, buybacks, trading plans, and political spending or lobbying disclosures that might come to pass after the election in a webinar series this week. Piwowar and Center COO Henry Eickelberg covered several scenarios for the 2020 election and what various outcomes could mean from a regulatory and legislative perspective.
A Democratic sweep would likely result in substantial policy and legislative changes. Piwowar, now Executive Director, Center for Financial Markets, Milken Institute, discussed the expected timetable, highlighting that former VP Biden has a transition team in place that is likely formulating strategy for the first 100 days of a potential Biden administration. If the Democratic party also controls the Senate, it is likely that Trump administration regulations on proxy advisory reform, shareholder eligibility to submit proposals, and human capital metrics (HCM) disclosures would be unwound.
Legislative efforts could target stock options, buybacks, trading plans, as well as political spending or lobbying disclosures. Any legislative efforts would likely require Democrats to control both the House and the Senate. Recent legislation could indicate Democratic policy priorities if a sweep does occur. These include Senator Elizabeth Warren’s (D-MA) Accountable Capitalism Act and Rep. Brad Sherman's (D-CA) newly-submitted bill from to prohibit the granting of stock options if the grantor or recipient is in possession of material non-public information.
The SEC under a Democratic administration would likely take up HCM and D&I disclosures. Similarly, a Biden administration could require government contractors to substantially enhance their diversity and pay data.
Outlook: Should President Trump win re-election, a notable push for new regulations is unlikely. However, if Democrats sweep, we could see a nearly 180 degree turn in policy. The Center is prepared to highlight the benefits of proxy advisory reform including proxy advisory firms’ fluctuating research quality and conflicts of interest. Further, the Center is prepared to advocate for an ongoing, principles-based approach to ESG and HCM/D&I disclosures rather than overly prescriptive requirements that have little applicability to a given company’s ongoing material risks and opportunities.