Wednesday, January 21, 2004

All bets are off

The corporate governance tsunami is a work in process. With no "head" and several powerful contestants, predicting the 2004 ending is a waste of effort. Maybe, yet once again, corporate dictators can buy off the regulations. But, maybe not. The SEC is not the enforcer to pay off, Eliot Spitzer is. The way I see it, the snare for the regulator and the regulated is the huge army of lawyers who get rich from nailing business with negligence. With the new laws removing the business judgment rule protection, is it likely these lawyers will sit idly by with business as usual? What has happened for sure is that the liability insurance policy now excludes regulatory violations. If it is to be business as usual, which has a great record of persistence, then there is no point to promoting bounded rationality in the name of compliance. Smart money hedges the bet. Explain the possible disturbance to business, but do not promote a fix. Your market becomes the lawyers who can use your compliance standard of care to build a case against damage consequences from business as usual.

Trevor correctly quantifies the resistance of the hierarchy to give up its power and control engine. We already know it's too late to implement 404 for a June start date and compliance action is minimal. This scene will not play out quickly. The question is what needs to be done now to be able to exploit the twists and turns headed our way?