Regulation: What is It Good For? Absolutely Nothing
When I was a corporate officer in the high-tech industry we never talked about governance, transparency and oversight. Never. Ever.
Our executive management and board meetings consisted of determining which strategies and plans would best serve the long-term interests of our customers, employees and investors and meet our common goals. That’s what we did. That’s all we did.
Things are much different now. We sure have come a long way. In the wrong direction.
Instead of talking about transparency, governance and oversight, we should be asking if we as stakeholders actually benefit from all the rhetoric, regulation and legislation surrounding those friendly-sounding sound bites? Does anyone?
The answer is no.
So why all the talk? Because we live in a nation of social media and gadget-addicted news junkies and self-serving politicians that know exactly how to leverage every opportunity to grow their personal empires. The result is a massive self-serving cycle that goes something like this:
Something bad happens. Everyone senses an opportunity. The 24/7 news cycle over-hypes it. Activists and lobbyists draw battle lines. The social media hoards go bananas. Politicians propose legislation and regulations to score points with constituents. Government grows and taxes are imposed. Everyone pays and nobody benefits. Rinse and repeat.
I would admit to sounding a little cynical if it wasn’t true ... and so, so sad.
Just look at General Motors and the ignition switch defect scandal now linked to 32 deaths. In a Senate hearing back in April CEO Mary Barra said the culture at GM has changed since its 2009 bankruptcy and bailout. She said customer safety should trump any business consideration. And you know we all wanted to believe her.
But none of that turned out to be true. Not only is it apparent that GM has known about the ignition switch defect for more than a decade, the automaker authorized a redesign in 2006 and deployed the new switches in 2007 without changing the part number from the old switch to the new one.
That did not happen on its own. There are systems in place to ensure that, when a part changes, so does the part number.
By 2012, GM had identified at least six fatalities and far more injuries caused by accidents attributable to the defect. But there was no recall. By the end of 2013 the company had determined that the switch was to blame for at least 13 deaths and 32 crashes. It ordered half a million replacement switches. Still no recall.
And this is one of the most heavily regulated industries in America we’re talking about. There were a host of investigations by regulators and a clear pattern of ignition switches turning off and cutting power to engine, break, steering and airbag deployment systems over the years. And yet National Highway Traffic Safety Administration (NHTSA) officials failed to connect the dots.
Had GM replaced a $2 part when it first learned of the problem instead of covering it up and putting short-term profits ahead of customer safety and the long-term interests of its stakeholders, all those people would still be alive today. And the NHTSA did nothing to prevent that.
Transparency and oversight my petunias.
As for corporate governance, that’s just laughable. Some companies do it right on their own, as we did back in the day, but far too many boards just rubber-stamp whatever their CEOs and leadership teams put in front of them. And all the regulations and all the legislation and all the king’s horses and all the king’s men haven’t changed a thing.
There is absolutely no evidence that the Sarbanes-Oxley Act passed in the wake of the Enron and WorldCom scandals has done anything but hurt corporate America’s bottom line and kept smaller companies out of public markets while lining the pockets of thousands of SOX lawyers, accountants and consultants.
Don’t even get me started on Dodd-Frank.
Now President Obama wants to regulate the Internet using all the hype over net neutrality as cover to reclassify the Web as a utility and give the FCC enormous power over Internet pricing, products and service. One of the four rules he’s calling for in his proposal is “Increased transparency.” This from an administration that’s covered up enough scandals to blanket the entire nation.
You’ve got to laugh at the irony.
I can’t exactly recall when transparency and governance became such popular terms but I can definitely say that none of the rhetoric, media hype, or legislation and regulation enacted in their name has done a bit of good for anyone they’re supposed to help.
Edwin Starr may have been talking about “War” when he wrote, “What is it good for?” -- but he may as well have been referring to regulation.