Embrace the madness

Let me cut to the disclaimer. Usually any opinion piece I write is followed by a nice, plain-vanilla disclaimer. (Don’t worry you vanilla fans, the usual disclaimer does make its customary appearance at the end of this column.) But, before I get to the heart of this opinion piece, I want to take the unusual step of stressing that this is an opinion piece. My very own, personal, dimwitted opinion. Just me, with a smile and a shoeshine, to borrow a phrase from playwright Arthur Miller.

Now, getting down to cases: As of January 20, 2009, the operative phrase for corporate America could be an Eddie Murphy line from 48 Hours: ‘There’s a new sheriff in town.’

A democrat is in the White House for the first time in eight years, and for only the second time since 1980. When Barack Obama was sworn in as president, he enjoyed very large majorities in both houses of Congress to work with. On top of all that, Obama was one of the senate sponsors of Representative Barney Frank’s ‘say on pay’ legislation. The new president and heavily democratic Congress take office in the midst of an economic maelstrom the likes of which haven’t been seen since the Great Depression, with taxpayers and corporate executives and corporate shareholders screaming for action.

At the end of January (when I wrote this opinion piece), various players in the Obama administration were making it clear that there’s not going to be any more ‘business as usual’. Anybody on Wall Street who took a bonus in 2008 was ‘shameful’. Democratic senator Claire McCaskill of Missouri was introducing a bill to cap executive pay at $400,000 (the same as Obama’s). Frank was talking about making the Fed into the supreme regulatory body.

By the time you read this, it’s safe to say that a whole bunch of new regulations will either be in place, sailing through Congress or being put in motion thanks to executive orders.

No way out
There are lots of people out there who believe, despite recent financial excesses and regulatory failures, that the best way for the American economy to move forward is to trust free markets. Unfettered capitalism, given a chance, will straighten things out. The only thing regulations do is cripple businesses. And that means a loss of jobs and of tax revenues (from individual workers and corporations) to the government.

While it may be true that capitalism in its least regulated form is the most potent force for economic good, we’re not going to find that out anytime in the immediate future. We may not find that out for the short-term future. After what’s been going on with the markets, and the federal bailout, and the hedge funds, and naked short selling, and the lovely little scandals thanks to the likes of Bernard Madoff, does anyone seriously believe that the majority of American voters and taxpayers don’t want some serious, Biblical-style punishments to be meted out? Does anyone seriously think that Joe Average doesn’t want to see the CEOs of quite a few big companies thrown into some kind of corporate gulag?

And, if Joe Average has his way, there won’t be any escape from this gulag. Forget Steve McQueen jumping the barb wire on his motorcycle in The Great Escape. No way anybody gets out by hiding in the water tower the way William Holden skedaddled out of Stalag 17.

Let’s assume for a second that – like the corporate gulag – there’s no escape from new regulatory gulag. (It’s not really that big an assumption is it?) It’s just my lowly, semi-uninformed opinion, but it seems that corporate America really only has two options: fight the regulations or accept them. By fight, I’m not suggesting putting up the corporate dukes and slugging it out; I mean attempting to use leverage and advocacy to influence the new regulations. Not accepting them as the Obama administration and the democratic Congress promulgates them, but fighting; doing whatever can be done to make the coming rules a little less onerous.

However, Obama was elected on a promise of change. The public seems to have bought it; they absolutely think it’s time for change and lots of it. Most people seem to be furious at what they perceive to be across-the-board executive malfeasance. Many media outlets are not even bothering to pretend to be impartial. They’re foaming at the mouth with righteous outrage. So, instead of fighting the new regulations, maybe we should accept them.

In fact, I’d like to suggest we go much further than acceptance: We should embrace the change.

In Shakespeare’s King Henry IV Part 1, the character of Worcester, a prisoner about to be taken to his execution, says, ‘And I embrace this fortune patiently, Since not to be avoided it falls on me.’

I do not mean to suggest that corporate America’s plight is as bad as imprisonment and imminent death. But Worcester recognizes the inevitability of his fate and embraces it. Maybe corporate America also needs to step-up to the inevitability of new regulations. Forget about whether it’s a good thing. That is no longer the issue.

Or, as Abraham Lincoln said in a speech in the US House of Representatives on internal improvements, June 20, 1848 (during his one term as a congressman), ‘The true rule in determining to embrace or reject any thing, is not whether it have any evil in it, but whether it have more of evil than of good. There are few things wholly evil or wholly good.’

Nothing is completely evil, or completely wrong. And, if it is also inevitable, well … isn’t it time to start thinking about embracing?

Riding the rising tide
Back when one of the hot issues in the contest between corporate executives and shareholders was majority voting, Pfizer decided to embrace the change and voluntarily implemented a form of majority voting. Intel soon followed with what may have been an even more robust form of majority voting, and it wasn’t long before a huge number of companies had adopted one or the other company’s model. But on issues such as say on pay, proxy access and the broker vote, most companies have dug in their heels and don’t want any more change. Given the current climate, does anybody really think that most of these issues aren’t going to be resolved very soon in favor of the institutional investors of the world?

If, instead of fighting off every idea from the institutional community, public companies embraced many (or all) of them, imagine how much more traction the companies’ points of view on the issues would have. It would take time, but companies could eventually be seen as collaborating on corporate governance with the investor community. There could be a genuine give-and-take instead of the automatic black-and-white positions that tend to prevail now.

And, if I’m right that many of the current issues are about to be resolved in favor of the investors, shouldn’t corporate America garner what good will it can by embracing these things instead of fighting a losing cause?