The U.S. Securities and Exchange Commission is planning a policy change that, as a Bloomberg article describes, “would shift power from investors to corporate boards” and “limit[s] the power of dissenting shareholders.” Unfortunately, when Chairman Jay Clayton announced the change, he cited several fabricated letters of support to the SEC.

The SEC failed to recognize that many letters followed a similar template and included a random line in the mailing address—“A Coalition of Growth Companies.”

Clayton was impressed that the SEC heard from such a variety of people, such as veterans and retired police officers, but people contacted said they didn’t write the letter or agreed to having their name on a letter without understanding the implications.

The Bloomberg article reports Clayton’s response:

The SEC declined to comment on any irregularities with the letters. In a Tuesday interview, Clayton sidestepped a question about how the agency ensures comment letters are genuine. He did emphasize that the regulator’s potential revamp of shareholder voting rules are proposals, adding that there will be ample time for people on both sides to weigh in before any changes are finalized.

“We welcome input in all ways,” Clayton said in the interview with Bloomberg Television’s David Westin. “On this issue, where there are a lot of different views and a lot of different interests, we encourage people to come in and talk to us, send us their comments.”

Discussion:

• How does something like this happen? Who is responsible?

• Assess Clayton’s response. How well is he handling the situation? What, if anything, should he do differently?

• What leadership character dimensions are illustrated by this situation?