Floyd Norris notes in this NY Times article that Securities and Exchange Commission chairman William Donaldson is not sounding or acting like the go-slow regulator that many expected when he was named to the post. As Mr. Norris notes:

[Mr. Donaldson] compared the current system of electing corporate directors, in which the incumbent board nominates a slate and no other candidates are on the ballot, to elections in the former Soviet Union: “It’s not really an election at all.”

[Mr. Donaldson] also emphasized the need to do something to change what he called the Lake Wobegon system that has caused pay for corporate bosses to soar. He said boards all conclude their chief executives are above average, as are all the children in Garrison Keillor’s mythical Minnesota town. He also said he was determined to force hedge funds to register with the S.E.C.

As one might expect, Mr. Donaldson’s proposals are not particularly pleasing to some elements of the Republican Party:

Mr. Donaldson’s efforts are frustrating to those who expected that the Bush administration would roll back regulation. The proposal received a D- average grade from Wendy Gramm, director of the regulatory studies program at George Mason University. “The S.E.C. offered no evidence that existing solutions to poorly performing boards do not work,” wrote Ms. Gramm . . .

Say what? Wendy Gramm, the former Enron director, is the “director of regulatory studies” at George Mason University? And is a spokesperson against Mr. Donaldson’s rather lame recommendations regarding corporate governance?
Could there be a worse spokesperson for maintaining the status quo in regard to “solutions for poorly performing boards?” Mrs. Gramm sat on an Enron board that blithely approved a staggering number of off balance sheet debt vehicles that admitted felon Andrew Fastow engineered to disguise Enron’s foreboding debt load, approved the clear conflict of interest that allowed Mr. Fastow to become enriched from such off balance sheet investments while he was Enron’s CFO, sat on Enron’s board (and was well compensated for doing so) while her husband — former Texas Senator Phil Gramm — was receiving campaign contributions from Enron and its upper management, and sold over a quarter of million dollars of Enron stock before the scandal broke.
My sense is that Mrs. Gramm’s above quote just might make it into the hands of the plaintiffs’ lawyers who are suing Enron’s board and its insurers for billions.
Update: Barry Ritholtz over at The Big Picture is even more incredulous than me over this.
Update II: Just for clarification: I tend to agree with Ms. Gramm’s position that less government regulation of corporate governance is generally better than more. But I just don’t think she should be out front for that position on this particular issue. Her Enron legacy is serious baggage.

Steven Pearlstein of the Washington Post (free subscription required) has written this fine article on the problems in the American horse racing business.
Horse racing was one of the three — along with baseball and boxing — most popular sports in America in the early 20th century. However, abolition shut down almost all tracks in America and horse racing did not make a comeback until the 1930’s. That’s when state governments utilized pari-mutuel betting to generate revenue during the Great Depression era. Racing quickly became popular again, as the recent fine book and movie “Seabisbuit” relates well.
However, as Mr. Pearlstein’s article describes, racing struck a devil’s bargain by accepting dubious state regulation and taxation in return for its right to exist. Accordingly, while other professional sports skyrocked in popularity and value during the generation after World War II, horse racing remained mired in mud of governmental micro and mismanagement.
So, how is the industry attempting to change this course? The less creative approach is to beg the state governments to allow horse track owners to turn their facilities into “racinos” — that is, allow the owners to install slot machines at the tracks and split the take with the state.
On the other hand, Churchill Downs, Inc. is pursuing this consolidation business plan that would create what amounts to a national tour of quality tracks that would host competition of top horses similar in the same way the Tour Players’ Association puts on professional golf tournaments around the country. This approach seems to have at least a flavor of creativity that is utterly absent in the “racino” stategy.
One anecdote about horse tracks. Houston’s race track — Sam Houston Race Park in northwest Houston — was built in Houston during the early 1990’s, and promptly went into bankruptcy a year or two after it opened. A bright client of mine who was thinking about making an investment in the track to bring it out of bankruptcy asked me to sit in on a meeting with a representative of Churchill Downs, Inc. to determine whether they would be interested in being a co-investor and manager of the track.
During the meeting, the Churchill Downs rep indicated that the company had down a feasibility study on building a track in Houston several years earlier before deciding to pass. He disclosed that their study indicated that the best approach to developing horse racing in Houston was to start relatively small and expand the facility as the popularity of the product developed over time. Consequently, the study indicated that initially spending about $40 million (I may be off on the numbers a bit) and placing the track in a corridor between the Astrodome area on the north and the Gulf Greyhound Dog Racing track near Galveston on the south was the way to go.
“So,” I inquired or the Churchill Downs representative. “Where do you think the current owners went wrong with the Sam Houston Race Park?”
“Well,” he replied. “Except for spending more than twice as much as they should have in building it, and then placing it in the wrong location, nothing.”
My bright client passed on the investment opportunity.
Hat tip to Professor Sauer over at the Sports Economist for the link to article and this issue.