US - Some of the largest pension fund investors and corporate governance experts in the US have urged senators not to undermine key provisions in a bill proposing sweeping reform of the US financial system.
The Senate Banking Committee meets this week to hammer out new rules governing financial products, banks and corporate governance aimed at warding off future crises like the one that paralysed financial markets and punished major Western economies with the deepest recession in a century.
The worry is that massive lobbying and resistance from Republicans could water down or even kill off the bill offered by senator Christopher Dodd, Democratic chairman of the committee.
Yale senior associate dean for corporate governance Ira Millstein, who was for many years corporate counsel to top US companies, stressed that Dodd's provisions for strengthening shareholder rights should feature in the final draft.
"Do have confidence in long-term shareholders to act like the owners of the company - to improve boards, and performance," he said.
"Don't be fearful that the legislation will lead to an SEC proxy access proposal that would upset board cohesion and lead to ‘bomb throwers' populating the board room," he added.
California State Teachers' Retirement System director of corporate governance Anne Sheehan also backed tighter rules on corporate governance and warned Congress against interfering with the SEC's authority on proxy access.
"Regulators can only do so much," she said. "They need to be supported by market mechanisms. Chief among these are tools to hold boards accountable."
Pension funds also urged senators to rein in the "wild frontiers of the capital markets", such as over-the-counter derivatives, strengthen the regulation of credit rating agencies and not to dilute the powers of the proposed consumer protection watchdog.
Public Employees' Retirement Association of Colorado legal counsel Greg Smith warned Congress to make sure the Consumer Financial Protection agency has wide authority, independence and enforcement powers to adequately protect American savers, who have borne the brunt of Wall Street's cavalier behaviour.
The 470,000 member pension scheme was forced to reduce pension benefits to its members and retirees as a result of the financial crisis.
"These are the American middle class, facing unemployment, home foreclosures, and also the loss of their savings for retirement," Smith said.
"Those voters will be at the polls in November, and Congress must not be found wanting."
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