Throw off the Shackles

By Ted McDougal

In our last post, we commended a shift in regulatory principles from rebuke to restoration. Time to weigh in again now that the administration has outlined another sensible approach for rationalizing a burdensome supervisory structure installed under very different circumstances in 2010.

As originally written, the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act seemed like an appropriate response to the worst market freefall since the Great Depression. However, the time has come to throw off the shackles, because limiting the risks financial firms are permitted to take artificially impedes economic growth. Not to mention the staggering taxpayer cost to administer as many as 225 rules across a total of 11 federal agencies.

The National Economic Council believes current regulations are so sweeping that it’s hard for banks to lend, which in turn limits consumer choices. Writing in the Washington Post, Renae Merle and Steven Mufson noted that, “Big banks, which have spent millions complying with the law, have called for a tweaking of the rules, rather than a complete overhaul. But smaller banks are expected to push for more aggressive changes. They say they are too small to pose a threat to the financial system but still face extreme regulatory burdens.”


We agree with regulatory principles that make regulation efficient, effective and tailored; restore accountability in financial regulatory agencies; and empower consumers to make informed choices in the marketplace.

We also recognize that many provisions of Dodd Frank uphold the fundamental responsibility of corporate communicators to shape strategies that enhance engagement with stakeholders, ideally in concert with their boards of directors. These sound corporate governance practices should not be lost in a sweeping overhaul of regulatory practices, whether in financial services or other industries.

It remains imperative that companies proactively engage with shareholders on executive compensation, director qualifications, board composition and social responsibility. The powers granted by Dodd Frank were intended to move communication beyond simply expanding the amount of information stakeholders receive, in the name of transparency.

The ultimate goal for boards of public companies should still be to inform and motivate investors – regardless of size or sophistication – by ensuring they understand actions being taken on their behalf. Financial communication should continue to evolve beyond proxy statements to more accessible social media. Interactive relationships between corporations and their owners is good business, and government regulators should be empowered to help facilitate economic growth, rather than constrain it.

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