Earth to Bush: Fix the SEC

President Bush is in the waning days of an administration that has underachieved expectations, to put it charitably. But there's still one thing he could get right--naming two of the right kind of Democrats to the Securities & Exchange Commission and thereby driving a stake into the heart of shareholder activists who are making a bid for power they shouldn't have.

Already departed is Roel C. Campos. He was a Democrat and a populist who believed that shareholders should get everything they ask for. He was a strong supporter of an effort by the American Federation of State, Municipal and County Employees (AFSCME) to force companies to list AFSCME's candidates for their boards on their own corporate proxy ballots. That would be a huge boost for AFSCME's efforts to get its candidates elected to boards.

Also announcing her departure by the end of the year is Annette L. Nazareth, another Democrat. Although not as strident as Campos, she is also seen as a supporter of the so-called shareholder access movement. By law, the commission must have two Democrats and two Republicans. The chairman's position swings depending which party is in power. Cox is a California Republican, and he's joined by two other GOP members, Paul S. Atkins and Kathleen L. Casey.

What Bush could now do is to name two Democrats who lean to the more pro-business side of the party. They should be pragmatists who understand the nature of how boards engage with chief executive officers and their management teams. CEOs are worried that their boards could become populated with special interest, one-cause directors. In their view, boards would become like a mini-United Nations featuring raucous debates rather than meaningful dialogue.
Tellingly, the shareholder community is divided on the AFSCME bid. Such powerful investors as TIAA-CREF, which has assets of $428 billion, are not convinced that shareholders should be in the business of choosing and nominating directors. These more cautious investors argue that having special interest directors on boards might hurt those companies' performance and thereby undermine their stock prices.

On this issue, the cautionary voices are wisest. If Bush can find two Democrats who will heed the voice of wisdom, he could help Cox and future SEC chairmen navigate this highly contentious issue for many years to come.