By Severin Wirz
A memorial service was held today at the Washington National Cathedral to honor Roderick M. Hills, who passed away on October 29, 2014. Mr. Hills served as counsel to President Gerald Ford, and then served as chairman of the Securities and Exchange Commission between 1975 and 1977.
As chairman of the SEC, Hills oversaw the Commission at a crucial time when its role changed from oversight over what companies were required to disclose in their public filings, to the regulating of corporate conduct itself. One of Hills’ first major tests would be the SEC Enforcement Division’s findings that U.S. issuers were routinely involved in bribes to foreign government officials. At the time, foreign bribery was not illegal under U.S. law, although under Mr. Hills’ tenure, over 400 companies would voluntarily come forward to the Commission admitting to having made improper payments abroad. Those disclosures would eventually lead Congress to pass the Foreign Corrupt Practices Act in 1977.
The SEC’s incursion into corporate wrongdoing during that period was a role that Mr. Hills did not always relish, and among the five commissioners at the time, there was often disagreement between them as to whether improper payments abroad, especially minor ones, should have to be disclosed to shareholders. The SEC also received criticism from the accounting industry, with many in the profession disapproving of the books and records provisions of the FCPA as an effort to turn accountants into corporate watchdogs for the SEC.
Mr. Hills was often himself critical of the criminal provisions of the FCPA, but advocated strongly in favor of providing more sanctions for companies failing to keep accurate corporate records. Last February, in a speech he gave in Mexico City at a TRACE-sponsored workshop, Mr. Hills again remarked on the need for developing countries passing corruption laws to focus on accounting standards and disclosure rules rather than solely on criminal enforcement: “A better policy is to offer broad amnesty to those who voluntary disclose their bribes and tough action against those who do not… accompanied by the development of strong accounting and auditing practices that will uncover concealed bribery.”
Mr. Hills’ work in the field of corporate governance went beyond the mere issue of corruption, though, and as chairman he spearheaded the SEC’s efforts to bring new rigor to the independence of corporate directors. Working alongside the New York Stock Exchange, he pushed for the adoption of rules that publicly-held companies create audit committees composed of independent directors to work with outside auditors. Those committees are now standard today among both private and publicly-held companies.
Born on March 9, 1931, Mr. Hills grew up in Los Angeles where his father worked as a janitor. He became the first in his family to go to college, receiving both his B.A. and LL.B. degrees from Stanford University and then going on to serve as law clerk to Justice Stanley F. Reed of the Supreme Court of the United States. After becoming a named partner for the Los Angeles-based law firm of Munger, Tolles, Hills & Rickhauser, he served as Chairman of the Board of Republic Corporation (NYSE), until he was asked to take on the job of deputy counsel to President Ford in 1975. A few months later he was nominated by Ford to be Chairman of the SEC, at a time when his wife, Carla Anderson Hills, already served as secretary of Housing and Urban Development. In many ways, the two formed one of the most potent husband/wife pairings in Washington D.C. at the time.
One of Mr. Hills’ greatest achievements during his time in Washington was his ability to bring different viewpoints closer together, even opposing ones. As chairman of the SEC, he hired the first chief economist to work at the Commission at a time when the focus by many in the SEC was on more lawyers and regulation. In his last appearance as chairman before the Senate Committee on Banking, Housing and Urban Development, Senator William Proxmire of Wisconsin discussed with Mr. Hills the soon-to-be-passed Foreign Corrupt Practices Act and closed with this goodbye:
“Chairman Hills, before you leave, I want to say you have not only been, as I said earlier, an outstanding chairman of the Securities and Exchange Commission, but you have been a superlative witness before us on a number of occasions. We are going to miss you very much.”
That Senator Proxmire had voted against Mr. Hills’ nomination as Chairman of the SEC in 1975 is testament to the fact that Hills earned the respect not only of those who shared his beliefs, but also of those who did not.
After leaving government, his focus turned to Asia, becoming chairman of the Peabody Coal Company and spending many years promoting good business practices in Southeast Asian countries. In 2003, he and his wife created the Hills Program on Governance that established Centers for the Study of Governance in academic institutions around the globe, including at the Asian Institute of Management in the Philippines and the University of Indonesia. In that role, he again returned to the issue of corruption, this time looking at its root causes by identifying serious integrity problems in both the public and private spheres. In 2009, he was one of five anti-bribery professionals, (including Alexandra Wrage from TRACE), who traveled to Moscow during President Obama’s trip there for high-level discussions about commercial corruption in Russia.
Mr. Hills will be remembered as a guiding spirit for those dedicated to corporate governance and government transparency, which he made into a lifelong passion. He was not only a source of wisdom, but he was a friend to TRACE, generously offering his time in order to advance the goals of anti-corruption. Last year, while working on a book, I had the great fortune to sit down for lunch with Mr. Hills in Washington D.C. in order to discuss with him his time at the SEC. Although I expected that he’d want to relive his glory days, he remained animated around present-day issues, continuing to argue the responsibility of the auditing profession to better detect corruption and the relative merits of a disclosure versus criminalization approach towards enforcement. It was our first time meeting one another, but he was gracious enough to sit with me for over two hours, long after the bill had arrived. Until the end of his life, the depths of his convictions were matched only by his kindness towards others. He will be greatly missed by all who knew him.
Severin Wirz is Manager of Advisory Services at TRACE International. He may be reached at Swirz@TRACEinternational.org.