Balancing act: regulation and ethics.

• Author: Fleischman, Edward H.
• Position: Future interaction between corporations and regulatory bodies - Viewpoint

Will interaction between corporations and regulatory bodies change in the coming decade? Will regulation be more burdensome or less?

In the September/October issue of Financial Executive, a number of executives reflected upon regulatory issues. Among those reflections were several I'd like to address. Here is the first:

* "Companies in the next decade will interact with regulatory bodies much as they have in the past. If an issue affects a company, then that firm will get involved. I don't see any proactive initiative developing on the part of individual companies of their lobbying agencies."

I agree that, for the most part, the business community will go on interacting with regulatory bodies much as it has in the past. But there is one area in which the corporate financial community has the obligation, and the opportunity, to do more.

Members of the corporate financial community go to Washington to talk to senior staff and commissioners at the SEC. They comment on SEC rule proposals, as well as on FASB and AICPA exposure drafts. They also talk to elected leaders and their staffs in the halls of Congress--sometimes effectively, as happened with the Wyden bill last year. But their sights should now be raised in Washington, as they long have been raised at the FASB.

Why? Because not only does the corporate financial community need input into SEC decisions, the SEC needs the input that the financial community can provide. The SEC has had, in my memory, only one in-house corporate lawyer as a commissioner. It has never had a professional financial executive as a commissioner. There hasn't even been a commissioner with an accounting background for a number of years. Input into the SEC requires a seat on the Commission.

Yes, it will be a long political pull, but the game is very much worth the candle. And since it won't be achieved quickly, the time to start is now.

THE BURDEN OF REGULATION

In the Financial Executive article, other executives made these comments about interacting with regulators:

* "Regulation will no doubt become more and more burdensome and expensive. It's a function of big government, and it would be very difficult for the system to change. Too many people have too much to lose, and these are the same people who are changed with orchestrating the changes."

* "Our challenge is to ameliorate the excesses of recent years without reverting to counter-extremes or regulatory strangulation. For example, the sensationalist media and...