Today a leading European financial publication based in the UK, Financial News, published a story regarding RiskMetrics IPO now being reviewed by the SEC. Riskmetrics primary clients are hedge and private equity firms, for which they construct math driven models resulting in many of the derivative based investments that are now destabilizing the financial industry. The article is titled “Corporate Governance: who is guarding the guardians.”
On October 24, 2007 I wrote a letter to SEC Chairman Christopher Cox, pictured above, search this blog for Cox to view related content, requesting that the RiskMetrics IPO be suspended due to RiskMetrics failure to conform to important proxy rules that require full disclosure of its ownership structure. Two weeks later I received a response from Cox, a form letter signed by a branch manager referring to the date of my letter with no mention of the subject. Failure to note the subject of course makes it difficult for oversight groups to see this request.
Harvey Pitt and Bill Donaldson, the two previous SEC Chairs, both sent thoughtful follow-up letters, hand signed, upon receving request of similar importance. Given the significance of this issue, I was simply stunned.
Meanwhile, the financial markets are sufferring from a growing crisis of confidence. It is no wonder, when the nations most important proxy firm is allowed to snub vitally important SEC proxy rules, and potentially gain the SEC’s approval for an initial public offerring.
Christopher Cox, a former Congressman and attorney, is the first elected politician to serve as SEC Chairman, and like the CEO of Etrade, another attorney without broad based financial experience whose stock has declined 80 percent in 2007, is too focused on making assumptions and needs to realize that vitally important rules, such as FASB 115 and proxy rules, were developed over a long period of time and are critically important to maintaining investor confidence. Failure to do so and the requisite heavy lifting to restore integrity, could cost the nation dearly.
In Cox defense, it is curious to note that while the NY Times roundly criticizes the state of corporate governance, as in today’s column by Paul Krugman, pictured below, it has provided almost no coverage regarding the RiskMetrics IPO, the most important IPO in at least 25 years and the heart and soul of any credible dialogue regarding corporate governance. Never before has a proxy firm been publically traded.
Krugman’s article is titled “Who will pay the price for Corporate failure?” Hopefully Gretchen Morgenson, Floyd Norris or someone else at the times business reporting deparment will cover this remarkable story prior to the release of the RiskMetrics IPO. Clearly, the WSJ will quickly do a series of stories given that the Financial News has broke the story in the UK. Both Morgenson and Norris were provided the same materials that were provided to Financial News.