Climategate: The SEC Takes On … Climate Change
Corporate disclosure of material information is a good thing, even though few people bother to read the stuff. It would be great were the scientific community to adopt disclosure requirements similar to those imposed on U.S. corporations. It would also be great were folks such as the chairman of the UN climate change body to take the personal responsibility expected of corporate CEOs. Free beer for all would also be neat.
Aside from an apparent goof in what its spokesmen said on January 27, there are several problems with the SEC’s interpretative guidance, and perhaps some good things as well; the latter probably fall into the unintended consequences category. Among the problems is that the guidance requires that businesses speculate about the impact of things nobody knows will happen, or if they happen what form they may take. It is extraordinarily difficult to guess correctly what politicians and bureaucrats may do, particularly in an ideologically and politically driven context such as climate change. To the extent that actual climate change (as distinguished from statutes, treaties and regulations) is concerned, the situation is no better; only St. Al the Gored knows for sure. In any event, a certified oracle is needed because a wrong guess may well result in corporate liability. Guess that the impact will be insubstantial, and an investor who thinks any climate mucking about by the government will be calamitous is likely to become litigious. Guess that the impact will be catastrophic, and members of WWF and other proponents of such mucking about are likely to become litigious. Offended people often seek to assuage their hurt feelings by filing lawsuits.
To many, climate change legislation and treaties (as distinguished from administrative regulations) seem as likely as a blizzard in Florida during July. Could they happen? Maybe. Are they likely? Probably not. Still, there may be a substantial likelihood that a “reasonable shareholder” would view an omission to disclose their possible impact as having altered the “total mix” of information available; if “climate change legislation, environmental regulation, and international climate treaties” happen, it is anybody’s guess what they might entail. These problems put corporations between a rock and a hard place and are exacerbated by the continuing Climategate scandals and the persistent revelations that something is rotten in Denmark; even India doesn’t think much of the United Nations’ Intergovernmental Panel on Climate Change, headed by its own guy.
About the only climate change laws likely for the foreseeable future are regulations imposed and to be imposed by the Environmental Protection Agency (EPA), and they are of dubious legal validity. Even some Democrats in Congress are trying to put “caps” on the EPA’s regulatory emissions; it’s officially bipartisan:
Reps. Collin Peterson (D-Minn.) and Ike Skelton (D-Mo.) — who head the Agriculture and Armed Services committees, respectively — introduced a plan Tuesday that would prevent the Environmental Protection Agency (EPA) from placing limits on heat-trapping emissions from power plants, factories and other sources.
“I have no confidence that the EPA can regulate greenhouse gases under the Clean Air Act without doing serious damage to our economy,” Peterson said in a prepared statement. “Americans know we’re way too dependent on foreign oil and fossil fuels in this country — and I’ve worked hard to develop practical solutions to that problem — but Congress should be making these types of decisions, not unelected bureaucrats at the EPA.”
Mr. Peterson also observed that “such regulations would go beyond the original intent of the act. … It was meant to clean up the air, to get lead out of the air. It was not meant to fight global warming.”
There is no truth to any rumor that Punxsutawney Phil has become a consultant to the EPA or to any law firm specializing in securities regulation, even though it might be a good idea; he’s a down-to-earth type of guy and is more often right than wrong. On February 2, Phil saw his shadow when he emerged and there will therefore be six more weeks of winter weather. On February 3, a blizzard was headed toward the East Coast. On February 4, the prediction was for sixteen to twenty-four inches in Washington, D.C. Obviously, Punxsutawney Phil is a very prescient guy; he would probably do a better job than many consultants.
Here’s the potentially good part: The new interpretative guidance may, and probably should, encourage corporate entities to use their 10K and other SEC filings as bully pulpits to attack potentially harmful climate change legislation, treaties, and regulations. For a corporation to claim that actual climate change will help or harm it would be foolish; it would be a very dubious claim and could easily lead to litigation.
True, it seems unlikely that many investors actually study 10K and other required filings; they are written as CYA exercises, not to be read. Aside from their prolixity and difficult to read nature, they resemble the ubiquitous warnings required by California as to things it has determined cause cancer. However, the financial press frequently studies 10K and other such filings. Should significant corporations use them to disparage (or, for that matter, to claim that they will be substantial beneficiaries of) climate legislation, regulation, and treaties in legally required documents which thereby assume a patina of truthfulness, they may find better informed, less allegedly biased and more vocal advocates for those positions than they currently do. It will be easier and less expensive for them than the paid corporate advertisements recently permitted by the Supreme Court’s decision in Citizens United. The potential for out-in-the open lobbying is there, and it simply has to be used.
It is uncommon for a federal regulatory agency to mandate disclosures which by virtue of the law of unintended consequences might do some good. Still, that’s what the SEC appears to have done.
“Here’s the potentially good part: The new interpretative guidance may, and probably should, encourage corporate entities to use their 10K and other SEC filings as bully pulpits to attack potentially harmful climate change legislation, treaties, and regulations.”
Public opinion is now on the side of these companies to exercise this option. A few years ago the radical environmentalists might have forced their victims to capitulate to their demands. They might not have dared to fight back. The threat of bad publicity alone could have intimidated them into silence. The polling results now clearly show that most Americans reject the leftist establishment’s fear mongering and dubious scientific arguments. These companies no longer have to be afraid. The consumers of their products and services also realize that any financial costs will ultimately be passed along to them.
Sounds like another good reason for U.S. companies to reincorporate offshore (maybe in India or China?). Here, I’d like to ask: How long will it be before all that’s left are non-profits? But then, Obama wants to eliminate the charitable deduction. So, I guess they’ll all dry up.
All we’ll have left here are state, local, and federal bureaucracies, and unions. But, the upside will be, if there are no more U.S. companies to regulate or work for, would not the bureaucracies have nothing to regulate (read: oppress), and the unions no one to work for (read: put out of business)? Maybe they’ll all dry up, too.
The last one out, turn off the lights.
Surely, in order to assess the impact of putative climate change upon a business, it is necessary to have access to reliable data, rather than falsified data or data which has been corrupted by people who have manipulated it in some untransparent and perhaps incorrect manner. Could any company demand access to all original, uncorrected temperature and proxy temperature data, in order to fulfill their obligation to assess the impact upon their busuness, of climate change, rather than potentially mislead their shareholders and other interested parties, by knowingly produucing assessments which are based upon data which has already been proven to be unreliable, or deliberately falsified.
If a company produced its assessment using data provided by individuals or agencies whose data is already proven to be unreliable, surely the assessment would fail to qualify under rules of due diligence and the company could face legal action from any potentially adversely affected party.
From the point of view of this meteorologist, the SEC’s ruling is nonsense on multiple levels.
1. As noted, it is impossible to predict what bureaucrats will do, especially since it will be influenced by future elections, the outcomes of which cannot be known in the future.
2. There is zero (and I mean zero) methodology for predicting future climate with any skill.
As a practical matter, no one is going to use their 10K to attack the SEC, as it is an invitation for government retaliation.
I see this ruling as for the benefit of lawyers only.
Earlier snow-melt?
With 18 accumulated inches,
and more coming that would be nice.
Maybe the SEC should be renamed the Securities and Climate Change Commission in keeping with these new mandates.
It is widely held that large corporations are powerful institutions able to bully anyone getting in their way. Nothing could often be further from the truth in a Democratic society. Race hustler Jesse Jackson or environmental whack job Robert Kennedy jr. can unfairly do enormous damage to their public image. The resulting financial losses could be staggering. That is why the top executives tend to place their wet finger into the air to see which way the political and cultural winds are blowing. Perception regrettably can be more important than the truth. These corporate leaders are getting a golden opportunity to combat the politically correct extremists. They would be best advised to do so.
Obama is all againast this. When he took over chrysler, for example. He didn’t have a legal board meeting to fire the Pres and declare bankruptcy. They also did NOT report in their financials that the secured bond holders and debt holderes were facing a total loss. This is fraudulent lack of disclosure of liabilities.
Solution:
“Obama may on a whim sieze the company and it’s futre as a viable firm is at risk.”
So the SEC is in charge of climate change. Were these not the same people who were watching Wall Street inflate the bubble and didn’t see it happening? Admittedly blowing bubbles is not the same as reading anal thermometers to take the world’s temperature while adjusting for the urban heat island effect. But If they couldn’t catch Madoff’s Ponzi scheme, I wonder how they would’ve done with detecting fraudulent scientists and Climategate? Wait, that’s it, they’re not supposed to catch quackery; they’re suppose to facilitate it and call it cap and trade.