Death by 1,000 Cuts
During the recent KPMG Audit Committee Institute (ACI) meeting in Scottsdale, Arizona, I had the privilege to speak with several public company directors from Estée Lauder, Kimberly-Clark, Fannie Mae, Apple, Chevron, Amgen, Office Max, Dollar General Corporation, Air Lease Corporation and many more.
A frequent discussion topic on the panels and presentations involved how these experienced public company directors are working through the current, challenging corporate governance environment and managing to focus on strategic initiatives while navigating new regulations associated with Dodd-Frank.
“It’s a tsunami!” said one, in a very passionate and deliberate tone. “It distracts management’s attention from competitiveness and innovation!” said another, in an equally convincing manner.
As the day progressed, it became clear that none of the new and proposed regulations—except for the proposed whistleblower rule and say-on-pay metrics—are bad for business, in isolation. It’s the additive, duplicative impact, coupled with a company’s need to take risks, explore the unknown and deliver financial returns for shareholders.
How does President Obama expect businesses to help reduce the unemployment rate, deliver innovation to keep this great country ahead, and create opportunities to raise capital from global sources when so many compliance-oriented activity tasks exist to be hurdled? The regulatory risks that boards must tackle are significant and exponential in nature. It’s like 1 + 1 + 1 = 10 when considered within the context of determining ROI from a potential investment.
I call this “Death by 1,000 cuts.”
Concerns among directors definitely exist regarding two proposed rules: 1) the whistleblower rule and 2) say-on-pay metrics. I frequently hear concern from directors and management that employees may ignore companies’ robust compliance systems. Similarly, I hear of unintended consequences regarding the say-on-pay ratios: If shareholders don’t like a CEO’s pay ratios, the company may move low-paying jobs overseas or hire contractors to fill current jobs.
Wow. Talk about unintended consequences. Regulations that could actually stifle innovation and erode employment appear to be opportunities that all companies and organizations should use to submit comments to Congressman Darrell Issa (R-CA), chairman of the House Committee on Oversight and Government Reform, who has asked for input on current and proposed regulations that are either not favorable to or do not help accelerate economic growth.
As NACD works to advance exemplary board leadership, we are working on behalf of corporate directors and corporate governance experts to let your voices be heard. Importantly, one of our goals is to shift the conversation from compliance to leadership. NACD is working to educate the Hill, regulators and the Administration, promote business-building opportunities, and amplify the voices of all directors.
As many of us watched President Obama’s State of the Union Address a few weeks ago, we all witnessed the President’s plea for innovation, education and leadership. NACD is working for directors and boards. If you would like to help our cause, we welcome your support.