Compliance Bits and Pieces for October 7

These are some compliance-related stories that recently caught my eye:

How Well Do Financial Markets Separate News from Noise? Evidence from an Internet Blooper by Carlos Carvalho, Nicholas Klagge, and Emanuel Moench in Liberty Street Economics

How efficiently do financial markets process news of unexpected events? This question becomes particularly salient now, as multiple events across the globe drive market movements. Do these gyrations reflect responses to fundamental news or to “noise”? In general, it is very difficult to discern how well markets process information, because there is no objective way for observers to separate fundamental news from noise components when markets react to a news report. In this post, however, we examine an unusual episode involving a false news report that provides a unique look into this question. We find that even when noise can be clearly identified, markets may take as long as a week to fully process the “signal,” or relevant information, component of news.

Subcommittee Advances 5 Bills to Promote Job Growth

Five bills that ease the regulatory burden on small businesses and emerging growth companies were approved by a Financial Services subcommittee yesterday. The proposals make it easier for entrepreneurs and small businesses to access capital so their companies can grow and create jobs.

Cozy relationships and ‘peer benchmarking’ send CEOs’ pay soaring by Peter Whoriskey in The Washington Post

This is how it’s done in corporate America. At Amgen and at the vast majority of large U.S. companies, boards aim to pay their executives at levels equal to or above the median for executives at similar companies.

The idea behind setting executive pay this way, known as “peer benchmarking,” is to keep talented bosses from leaving.

But the practice has long been controversial because, as critics have pointed out, if every company tries to keep up with or exceed the median pay for executives, executive compensation will spiral upward, regardless of performance. Few if any corporate boards consider their executive teams to be below average, so the result has become known as the “Lake Wobegon” effect.

Overview of the Latest Corruption by American Companies by Mike Koehler in Corruption Currents

On a weekly basis – or so it seems – media allegations surface of corruption by or related to American companies. This article highlights three such instances: Koch Industries, Motorola Solutions, and Chevron.