Job was to fix the SEC. She didn’t stop there.

Vision
SEC aims to act as an agency that was high functioning, agile and intelligent, and committed to investor protection and market integrity.

Mission: Restoring SEC’s vigour and credibility within the financial regulatory
Community.

Value: vigor, credibility, high functioning, agile, intelligent, commitment, integrity. Goal:
Financial
Customer
Internal process
Learning and growth

Mary set up three strategic themes/priorities to pursue • Operational levers, • People, • and organization levers that assisted in achieving those options.

Three priorities

a) Assessing what needed to be done within the organization (internal assessment) [ First get the right people and then lead the strategy ]

1. Schapiro recruited analysts and people who understood trading, market structure, corporate governance and a whole range of skill sets that would be important for the future. 2. She recruited people from Wall Street to restructure the SEC’s largest division – enforcement and examination - “to make this regulator more responsive, more agile and clever and capable of seeing around corner to figure out where the next problems were before they hit us in the face”. 3. Schapiro leveraged the SEC talent by bringing in new invigorating leadership. 4. Talented staffs on its books were sent to qualify as certified fraud examiners; a whole layer of management was removed and was reassigned to the front line 5. Specialized units was set up to focus on areas of concern such as corrupt foreign practices, insider trading, market manipulations and structured product. 6. New technology was introduced to make the strategy work.

b) Shifting the agency’s focus back to protecting the investor (investor protection focus) 1. Chairman Schapiro’s vision is to restore SEC’s vigour and credibility within the financial regulatory community. It is critical for the success of economy to have an agency that was high functioning, agile and intelligent, and committed to investor protection and market integrity. Chairman Schapiro also incorporated it into the SEC's operations. 2. She put devices “investor-focused agenda” in place to ensure “a Madoff” could never happen again to the agency. 3. She encouraged everyone to think and come up with an idea of “how does it help investors” 4. Hedge funds were registered for the first time. Rules were also set for over-the-counter derivatives and asset back securities. 5. She addressed the importance of understanding the risk and having transparency that is sufficient to understand the risks. Then build the structure to ensure there is compliance with all of the rules. 6. Whistleblower program was set up, which was about coordinating all tips into one central database to be able to track movement and detect securities violation, also, US Congress offer people a monetary reward if they provided information about ongoing securities law violations that led to a successful enforcement action 7. She addressed the importance of leverage, as SEC did not have adequate resources to do the job.

c) Acknowledging its mistakes 1. Visible crises can be enormously helpful in catching people's attention and pushing up urgency levels. Admissions of significant failures at the SEC extend back over many years and cover multiple areas of SEC operations, the credibility of the SEC as a financial regulator has never been lower. The SEC failed to discover a multibillion- dollar Ponzi scheme perpetrated by Bernard Madoff suggests fundamental weaknesses in its core enforcement.

Change Management (chapter 6)

SEC was starkly exposed as ill-equipped to deal with the chaos erupting across the globe. The public believed it had a watchdog and that watchdog let them down for failing to predict, control or even contain the global financial crisis. There were gaps in its performance that allowed someone like Madoff to pull off his multibillion-dollar Ponzi scheme for so long.

Mary Schapiro was appointed by US President Barak Obama as the 29th SEC chairman to rescue a languishing regulatory agency and restore its credibility and the public confidence in SEC. She changed the way things are done including creating new senior team, restructuring divisions, and programs to better address the modern financial markets.

Kotter’s eight-step model can be used to transform SEC successfully.

1. Establishing a sense of urgency Visible crises can be enormously helpful in catching people's attention and pushing up urgency levels. The SEC failed to discover a multibillion-dollar Ponzi scheme operated by Bernard Madoff and the collapsed of Wall Street stalwart Lehman Brothers, taking billions of dollars, business confidence and reputations down with it.

To be successful at organisational change, however, a change leader must use the crisis to shake up the organisation. This requires that the change leader to remove sources of complacency or minimise their impact and take actions that are bold or even risky. Personnel changes, even going beyond the traditional skills (it had always been lawyer-centric), instituted at the SEC may be seen as examples of sweeping change.

Staff were sent to qualify as certified fraud examiners and a whole layer of management were reassigned to the front line. Another thousand staff were grouped into specialised units to focus on areas of concern that had never been done before.

2. Forming a powerful guiding coalition Leading change is not a solitary task. Because change is hard, a powerful force is required to sustain the process, a strong leadership team – a team with the right composition and sufficient trust among members. Chairman Schapiro has changed the leadership team at the SEC.

(a) Mary set up new senior team, which consisted of analysts and people who understood trading, market structure, corporate governance and a whole range of skill sets.

(b)She also recruited people to restructure the SEC’s largest division – enforcement and examination – which she labelled “invigorating leadership”. This leadership team set about retraining, skilling up and motivating talented staff on its books.

3. Creating a vision and strategy Creating a clear and concise vision helps the organisation have a clear picture of the future so that it can align, concentrate and coordinate the efforts of everyone to achieve the final goal. Chairman Schapiro seems to understand this aspect of change leadership and seems to be incorporating it into SEC’s operations. Chairman Schapiro’s vision is to restore SEC’s vigour and credibility within the financial regulatory community. It is critical for the success of economy to have an agency that was high functioning, agile and intelligent, and committed to investor protection and market integrity.

There was a sign on her office door that read: “How does it help investors?”. It is a simple question, but it guides all that she does at the SEC. Everyone who enters her office understands that is the prism for all issues discussion. It does not necessarily dictate the outcome of every issue but the principle helps to shape their thinking and steers them in the right path.

4. Communicating the visions The vision needs communicated properly, regularly and impressively utilising every vehicle possible. Chairman Schapiro has regularly and repeatedly informed and reminded the SEC staff and various elements of the public about the SEC's recommitment to investor protection and the linkage of that vision to structural and operational changes at the SEC. A two-way communication between Chairman Schapiro, staff, bankers and members of an exchange was evident.

5. Empowering others to act and eliminating obstacles To implement the leader’s vision, employees need to be able to take action. This means clearing away structural barriers, skill deficiencies, systemic obstacles, and supervisory impediments that may forestall effective employee participation in the change efforts. Many of the structural and operational reforms implemented by Chairman Schapiro appear to be designed to empower SEC staff members for action that carries forward the change vision of the SEC.

• The restructuring of the Division of Enforcement was geared to clear structural barricades to effective enforcement efforts. • The decision to retain staff with "non-traditional skills" and the implementation of new staff training are examples of efforts to remedy skill deficits. • Staff were sent to qualify as certified fraud examiners. A whole layer of management was removed and those employees were reassigned to the front line. • Another thousand staff were distributed to different specialised units to focus on areas of concern such as corrupt foreign practices, insider trading, market manipulations and structured product.

6. Planning for and creating short-term wins Because the organisational change process is slow and constituents can be impatient, it is important for a change leader to accomplish certain limited objectives in the short term. Most people want to see clear data indicating that the changes are working and that the change process is not absorbing so many resources in the short term as to endanger the organisation. Evidences that the strategy worked: • SEC saw 2 record years of enforcement • Setting up the whistleblower program

7. Consolidating improvements and producing still more change Short-term wins are essential to keep momentum going, but the celebration of the wins can be lethal if urgency is lost. With complacency up, the forces of tradition can sweep back in with remarkable force and speed.

Chairman Schapiro says the SEC achieved a lot during her tenure but she fears that in the current low interest rate environment, brokers and investors are reaching for a yield and taking on riskier products while not always understanding the downside. She added that there was an increase in the sale of products that are quire complex, which have potentially greater returns but also have potentially much greater risks.

There are a number of really critical investor issues out there – a lot done, but a lot more to be done.

8. Institutionalizing new approaches It is fundamental to make sure the change has been implemented and embedded clearly in behaviors, shared values and the daily operations of the organization. Accordingly, it was of importance to understand the applicable behavioural norms and shared values of the SEC Because the core vision of investor protection should not be entirely inconsistent with the SEC's culture, these and other change leaders at the SEC should be able to "graft the new practices onto the old roots while killing off the inconsistent pieces." The important thing will be for the SEC's change leaders to continue to remember the organization's heritage and link it to the organization's new and ongoing operations.