New Rules Go Too Far
Opposing view: Overzealous 'reforms' threaten firms, workers and U.S. economy.
By Thomas J. Donohue
The government's response to Enron and other corporate scandals has been swift and decisive. Congress and federal regulators have enacted the most sweeping corporate governance and accounting reforms in 40 years. The SEC has hired more than 1,000 accountants, lawyers, and economists since late 2002. Corporate wrongdoers are being prosecuted, convicted and sent to jail.
Business is doing its part. Boards are more independent, they meet more often, and they communicate more frequently with shareholders.
From the beginning, the U.S. Chamber of Commerce has welcomed strong action to catch lawbreakers, enhance market transparency, and restore investor trust. However, the pendulum has swung too far. Regulators continue to impose rules that reach beyond the intent of Sarbanes-Oxley without regard to empirical data, deliberation, or any serious thought to the unintended consequences. And corporate directors and managers are being pressured to settle allegations of misconduct without a trial and the protections of due process or risk the existence of the company.
Talented leaders are turning down corporate board seats for fear of liability. CEOs are finding it difficult to get good advice from lawyers and accountants for the same reason. Private companies are reconsidering plans to go public, and public companies are wondering if access to capital markets is worth the steep price.
The rush to regulate is also hurting American workers and retirees whose jobs and pensions depend on the ability of companies to expand their operations and deliver a good return. The cumulative impact has been diminished risk taking and innovation at America's public companies, which is threatening job creation and competitiveness.
Moreover, some labor unions and public pension funds led by CalPERS — along with their trial lawyer allies and ambitious state Attorneys General — are exploiting the new governance environment to advance their own agendas. Under the guise of corporate governance, they claim to be looking out for the best interests of investors. But don't be fooled! They are only looking out for themselves.
It's time to pause and take a deep breath before piling on additional regulations that hurt our economy. While protecting the integrity of our markets is critical, we must also protect a free enterprise system that encourages and rewards strong business leadership and bold decision making.
Thomas Donohue is President and CEO of the U.S. Chamber of Commerce.
As published in USA Today, December 2, 2004.