Tuesday, October 28, 2008

Depending on your pole position, rules are made to be broken

The old adage “rules are made to be broken” seems to be the running theme as of late. You simply can not pick up a newspaper or turn on the television without hearing about another ’side-stepping’ of a rule or otherwise generally accepted practice.

Naked short selling; financial institutions accused of breaking ethical, if not judicial laws; governments overstepping previously-accepted boundaries - bailing out said institutions; NASDAQ “relaxing” a de-listing rule, even if temporarily…To those who think these are insignificant or isolated incidents, I say look at the bigger picture. These things together are disconcerting.

Put together, these incidents have helped to create a lot of the strife and stress we (most of us anyway) are feeling. Were the rules broken to make things easier? If so, that ease was temporary for most. Was it more sinister - a power play to override the less-than-desirable outcome that the rules would have allowed? Or are folks simply trying to cover for past mistakes? At what point did it become acceptable to cover repercussions of rules broken with additional rule breaking? What rung on the totem pole do you have to pass in order for the rules to no longer apply? And where does it stop?

My final thought is - when can I start bending rules and have it deemed an acceptable practice? The recession-bound economy certainly affects me as well. Even if my moral and ethical fortitude wasn’t a factor, rule-breaking wouldn’t be an acceptable practice for me. I’m too far down the totem pole.


Anonymous SWR said...

The only way to reign in rogue behavior is to have a functioning system of checks and balances. At the executive level within public companies there simply is very little accountability. The two main factors contributing to this lack of accoutability are tne lack of regulatory enforcement(not necessarily more regulation) and increased shareholder rights. For example, the level of enforcement of existing HSE regulations in this country is apalling and executives know this. By their very nature they are risk takers; regulatory non-compliance is simply another calculated risk they are willing to take. On the shareholder rights front, we need a major overhaul of the legal and regulatory framework by Congress and the SEC to give the owners of the company the power to hold the boards of directors and executives accountable for illegal activity, cronyism and the pay-for-failure entitlement culture that exists at the top. We don't need the government to restrict pay at the top. We just need to put the power back in the hands of the owners to throw the bums out if they don't perform. The latest Supreme court ruling on corporate campaign finance further disenfranchises the small shareholders. As it stands, this agency risk (i.e. the owners' agents acting contrary to the interests of the owners) is far too high because there are not adequate controls. One way change this situation is to get institutional investors aligned with small shareholders to form a lobbying group in Washington teamed up with political action groups such as the Tea Party activists. Until this happens, we will see continuing abuse and a further erosion of trust in our institutions.

January 28, 2010 at 6:57 AM  

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