I’ve been known to make some weird connections in this blog, so if you’re wondering what’s with the title of this posting, read on.
Some years ago, my wife and I took a fabulous trip to Egypt. One of the many fascinating things and people we learned about was Hatshepsut, a Pharaoh who ruled Egypt from 1479 to 1458 BC, or thereabouts. She’s been called Queen Hatshepsut, but technically that’s not correct, because she was literally a Pharaoh – a title that our guides told us was an exclusively male title for which there was no female equivalent.
Hatshepsut is believed to have been a very successful leader, opening trade routes and creating a boom in the construction of many grand temples and so on – something one of our guides referred to as an “edifice complex.” However, after her death, her son, Pharaoh Tutmosis III, and possibly his son (to say nothing of the patriarchy) sought to eradicate her existence. Her name was removed from records and many of her statues and images were defaced or destroyed.
But enough ancient history.
The connection between Tutmosis III and today’s SEC is that they share an obsession with eradicating the achievements of their predecessors. First, in April 2021, just weeks after current SEC Chairman Gensler was seated, he directed the SEC staff to revisit 2019 interpretations and 2020 rule amendments that imposed new burdens on proxy advisory firms. The same day, the SEC’s Division of Corporation Finance said that “it will not recommend enforcement action” based on the interpretations and amendments, and that if the interpretations and amendments remain in place, it would continue to refrain from recommending their enforcement “for a reasonable period of time” after any resumption of certain litigation against the SEC challenging the interpretations and amendments. Then, just days later, the SEC announced the removal of the PCAOB’s Chair and its intention to seek candidates to fill all five board positions on the PCAOB. See here for more details.
Then, on November 3, 2021, the SEC rescinded three Staff Legal Bulletins relating to shareholder proposals (see here).
And now, just two weeks later, the SEC has proposed to rescind the 2020 rule amendments referred to above.
I’m not saying that the rules and interpretations the SEC is reversing were perfect and should not be changed. In fact, the 2020 rules relating to proxy advisory firms were criticized by those firms, their institutional investor clients, and public companies alike. On the other hand, it seems to me that the reversal of a rule or interpretation with wide impact ought not be undertaken lightly. Consideration needs to be given to the consequences of regulatory flip-flops, not the least of which is that they create the impression that if you don’t like a rule, just wait a while and the next administration or regulator will reverse course. Perhaps most upsetting to me is that the SEC’s actions confirm, or at least strongly suggest, that the agency, long a bastion of political independence, has become just as politicized as everything else in our government and our society in general.