Seven Smokin’ Hot Buttons

The Long Arm of the Government—“Uncle Sam Wants You”—not to say the s-word

Potential government involvement in the companies of corporate America is a huge concern for boards. Tom Kolder, president, Crist/Kolder Associates, an executive search firm, says he’s heard the “s-word, socialism” thrown around by a lot of boards. The real difficulty, according to Charles M. Elson, The Edgar S. Woolard, Jr. Chair in Corporate Governance, Center for Corporate Governance, Lerner College of Business & Economics, University of Delaware, is the uncertainty issue. “The issue is that no one knows the extent of the federal intrusion into the boardroom and what extent it may or may not take and the effect on management oversight. Regulatory reform proposals overwhelm any other concerns.” The skeptics of federal oversight offer a strong argument. “We can’t legislate ourselves out of a problem that we behaved our way into—and that’s what we did. Ignoring the day-to-day management, other business issues [those are behavioral problems], and legislation won’t fix that,” argues Bailey. Grant Thornton’s Managing Partner of Public Policy and Corporate Governance Trent Gazzaway agrees. “What we missed leading up to the financial crisis was the right people asking the right questions. Without more effective questioning and answering, we’re really just papering over the problem. I don’t argue against the proposals on the table, there are pros and cons, but there is no way to legislate to ask the right questions.”

In addition to legislation that would directly affect board members, there are also other potential changes on the table right now—healthcare, financial reform, labor management, climate change, and energy—that management should be aware of. “There are lots of bills pending. Directors need to ask about legislation and how it will impact their company,” says David A. Cifrino, partner and Co-head of the Public Companies Group, McDermott, Will, and Emery LLP. “The implications of government involvement is a huge concern for many boards,” agrees Bromilow.