Mary Jo White is a rarity in Washington — a seasoned federal prosecutor, an expert on securities law and a true independent, in both party registration and attitude. Those attributes made her President Barack Obama’s choice to chair the Securities and Exchange Commission (SEC), the independent agency that makes and enforces regulations for the financial industry. One of White’s first acts upon taking office two years ago was to declare that “we make our decisions based on an impartial assessment of the law and the facts and what we believe will further our mission — and never in response to political pressure, lobbying, or even public clamor.”
It was a much-needed attempt to restore the SEC’s standing after years in which its reputation, like that of the markets themselves, had declined. Even before White took office, the five-member commission seemed ineffectual at heading off frauds such as Enron, and plagued by the same partisan polarization spreading through the rest of Washington. Formerly consensual, more and more SEC decisions were made along partisan lines or delayed because of internal disagreement. Congress hasn’t helped, with Republicans blasting the SEC for allegedly wrapping business in red tape and Democrats accusing it of coddling Wall Street crooks.
Exhibit A: an extraordinary June 2 letter from Sen. Elizabeth Warren, D-Mass., to White, 13 pages long, accusing the SEC chairwoman of “extremely disappointing” leadership — including the implication, vigorously denied by White, that she misled the senator in a recent meeting. Warren made clear she is particularly incensed the SEC hasn’t finalized a rule requiring publicly held companies to disclose the ratio between their chief executives’ compensation and the median compensation of their employees, as per the 2010 Dodd-Frank financial reform law.
Warren has a point: Five years is a long wait; no doubt the SEC could have conjured some plausible formula by now. Still, this is not the most urgent problem imaginable. The troubling disproportion between executive and worker pay is hardly a secret, nor is it clearly material to investors, who are the intended audience of SEC disclosure forms. The task of writing an SEC rule that conveys meaningful, statistically valid information and stands up to court challenge is complex — which is one good-faith reason that White would have trouble producing one, even if the other four commissioners were not divided over the issue, as they are.
A similar argument applies to Warren’s claim that White has failed to get enough companies to admit wrongdoing when they settle allegations out of court with the SEC. This, too, is not a no-brainer. Enhanced accountability is the upside of insisting on such admissions; the downside is exposing companies to the risk of private lawsuits, which makes them less willing to settle, and pay fines, in the first place.
The SEC’s work, in short, necessarily involves judgment calls, bound to displease at least someone. What we can expect from the agency, however, is a genuinely independent process, free of pressure and clamor, as White said. We see no evidence that she has failed to deliver on that aspiration and much evidence that she was right to declare it.