Updating Corporate Finance Regulations – BC Law Magazine

Professor Renee Jones is a well-established figure in corporate governance and securities law, known for her research in incentive pay for corporate executives. She believes that incentive pay structures, like stock options or bonuses tied to stock performance, can lead to unintended consequences such as excessive risk-taking or accounting fraud, rather than aligning the interests of executives and shareholders. When Gary Gensler, the chair of the Securities and Exchange Commission, appointed her as director of the Division of Corporation Finance in late June 2021, it was seen as a significant move to modernize corporate finance rules.

During her two-year term at the SEC, Jones led a team of 400 legal and financial professionals and oversaw the creation of more than twenty proposed and final rules. Some of the rules implemented include restrictions on executive stock trades based on non-public information and the requirement for public companies to adopt clawback policies for wrongly awarded incentive pay due to accounting errors. Jones attributes her success in shaping these rules to her decades of teaching and research experience in corporate and securities law.

One of Jones’ most influential articles, “Irrational Actors in the CEO Suite,” published in the Delaware Journal of Corporate Law, challenges the assumption that executives always act rationally in their long-term economic interests. Drawing on psychological research, she highlights the alarming prevalence of psychopathic traits among corporate executives and their tendency towards excessive risk-taking. Jones believes that these findings support the necessity of rules like clawbacks to curb misconduct in corporations.

In addition to her research on incentive pay and irrational behavior in executives, Jones has also delved into the phenomenon of “unicorns,” private startup companies valued at over $1 billion. She explains the surge in unicorn companies by changes in securities laws that allow startups to raise large sums in private markets and stay private longer. However, this lack of scrutiny can lead to mismanagement and fraud, as seen in cases like FTX and Theranos. Jones is currently working on a book, “Untamed Unicorns,” expanding on the challenges of oversight and disclosure at unicorns to prevent fraudulent activities.

Through her scholarship, Jones brings critical insights into the complexities of modern corporate finance rules and the impact of incentive pay structures. Her research sheds light on the need for transparency, oversight, and accountability to prevent market abuses and misconduct in the corporate world. As a distinguished scholar and leader in the field, Jones continues to influence the development of regulations that protect investors and promote ethical conduct in corporate environments.