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Ofcourse,beforeIbegin,ImustgivethestandarddisclaimergivenbyallSECspeakers,thattheviewsIexpressaremyownanddonotnecessarilyrepresenttheviewsoftheSecuritiesandExchangeCommission,theCommissioners,ormycolleaguesontheCommissionstaff.
LetmestartbythankingthisgroupforyourengagementwiththeSECovertheyears.FeedbackfromgroupslikeICGNisespeciallyvaluablebecauseyouprovidereal-worldinsightintothetypesofinformationthatinvestorsutilizetomakeinvestmentandvotingdecisions.TheCommissionanditsstaffneedtoknowthevalueyouplaceonthingslikequarterlyreporting,auditorattestationofinternalcontrolsoverfinancialreporting,ESGdisclosure,theproxyvotingprocess,andnumerousothermatters.
TodayIwouldliketodiscussatroublingtrend—theincreaseduseofdual-classsharesbycompaniesthatseektogopublic.Now,Iknowwhatyouarethinking—thatIshouldhavebeenhereafewyearsagowhenthiswasahottopic.But,inmyview,recenteventsshouldhaveusrevisitingtheissuewithgreaterurgency.
Whileitwouldnotbeappropriateformetocommentonspecificcompanies,youdonothavetolookfartoseewhereuncheckedcorporatecontrolcanlead.Thingslike…
Inmyview,whatwenowhaveinourpublicmarketsisafesteringwoundthat,ifleftuntreated,couldmetastasizeuncheckedandaffecttheentiresystemofourpublicmarkets.Thequestion,then,iswhatcanbedonetoavoidtheinevitablereckoning.
Again,wecananticipatewherethiswillleadus.Andourfearofthatresultshouldmotivateusmorethanthe“fearofmissingout”onthenexthottechstart-up.Investorswhoacceptweakcorporategovernancewiththeexpectationthattheycanbailoutbeforedisasterbefallsthemaresimplypassingalongharmtootherinvestorsandultimatelydamagingthemarketplace.Soitismyhopethatinvestorswilldomoretopushbackagainstthetrendtowardweakcorporategovernance.Hopefully,recenteventsinvolvingfounder-controlledcompanieswillserveasawake-upcalltoinvestors,andwewillbegintoseeareturntoanappropriatelevelofshareholderstewardship.
However,Ibelievethisisanareawherepolicymakersshouldnotbecontenttoletthemarketfixitself.Thestakesarefartoohigh,andtheissuepresentsaclassiccollectiveactionproblem.Inotherwords,investors,actingintheirownself-interest(oraccordingtotheirinvestmentmandates),maybeinclinedtoinvestincompanieswithweakcorporategovernanceeventhoughtheyknowthatthesecompanieswillultimatelyharmthebroadercapitalformationecosystem.Wecannotreallyexpectthisproblemtobesolvedbyinvestorsactingforthecommongoodwhenitgoesagainsttheirindividualinterests,soregulatorsneedtohelpusachievethecommongood.
Thankyou,again,fortheopportunitytopresentmyviewsonthisimportanttopic.Iwouldbehappytoanswerafewquestionsastimepermits.