Does regulation work? 'Don't ask me,' says former SEC chief
Just over-comply, Pitt tells financial services biz
His name was on the agenda, so you assumed he would show up. Still, we had some doubts.
Scott McNealy invited one of his bete noires - former SEC chief Harvey Pitt - to a Sun Microsystems gala yesterday. McNealy wasn't on hand to hear Pitt, but he was there in spirit. Pitt became the target for a McNealy crusade after imposing the Sarbanes-Oxley provisions, which the Sun boss reckons add an army of expensive auditors to the company's bottom line. Now Pitt had come to preach.
"This is an environment that literally calls out for regulatory change," Pitt said, making us wonder where this literal environment lives, so we can meet it. "And that doesn't mean fewer regulations."
Many of the speakers at the Sun event echoed that last comment. If you think Sarbanes-Oxley is the end of the regulatory parade, you're probably wrong. Expect more and more overhead, not less. Of course, these messages came from vendors selling compliance software and the like, including Pitt whose firm Kalorama Partners provides corporate governance services. How handy.
Large companies have been forced to deal with these compliance issues via a series of new laws that place tighter controls on privacy, record keeping and executive responsibility. (There's a good read on the current state of compliance here.)
At times Pitt did sound McNealyian. He conceded that federal regulators may have gotten a bit zealous during their quests to seem anti-Enron or anti-Worldcom to the public. There are "burdensome laws," he said. But where does admitting failure get us?
"There is a lot of grousing and whining that is going on out there and much of it is justified, but that doesn't change the fact that it's useless and counterproductive," Pitt said. Didn't he see McNealy's name on the check?
The only way for companies to get the Feds, the press and the public off their backs is to over-comply, according to Pitt. Adhering to federal regulations is "necessary, but it is not sufficient."
"Those that strive to do no more than the minimum to pass muster risk getting in the same mess," Pitt said.
Every member of every company needs to keep an ever-present, all-watching eye on every action and every other employee at all times, Pitt said. This magical form of omniscient compliance will be the best way to restore faith in corporate America.
Pitt also laid out a series of cliches meant to help companies such as: "a proper tone starts at the top," "a company's reputation takes years to build up but seconds to squander," "all breeches of standards must be treated as serious" and "just because it appears things are going well, it doesn't mean they are."
Pitt's wisdom didn't go over very well with some of the attendees, for whom any regulation is unwelcome. For example, Santosh Chandy, president of Vizrio, wondered how companies were meant to keep such close tabs on employees. "That's not the solution," told The Register. "The solution is that the SEC needs to do their job."
""If (the SEC) can't catch obvious crooks with millions of dollars and a huge staff on their side, how is a small business or small investor supposed to?" Chandy asked.
When a similar query was posed directly to Pitt during a question and answer session, the former SEC chief acted as if he could not hear it. After staring blankly at the crowd for 20 seconds, a Sun staffer went over and asked Pitt if had heard the question. Pitt said he had heard the question, but didn't understand it. The Sun staffer translated for Pitt.
"He wants to know if the compliance stuff is working or having any effect."
Again, Pitt said he didn't understand the question. Seriously. It's hard to capture just how odd this moment was with Pitt being the only person in the room who didn't know what was going on. After four tries, Pitt finally understood the question.
"It's impossible to say how effective the regulations are."
So much work for so little return.
Then, the hairy bear-like figure stepped down from the podium and cruised right on out of the conference room exactly 40 minutes after he had started. Many in the room were left feeling awkward and confused. Pitt, who was forced out of the SEC and back to the private sector, delivers speeches about as well as he catches corporate crooks.
Pitt capped off an otherwise very full day at the magnificent Art Institute of Chicago. Sun held its conference inside the recreated version of the original Chicago Stock Exchange - a room filled with ornate carvings and mosaics, intricate stained glass and the authentic big boards from back in the day.
Sun has been trying to woo financial services customers - many of which left Solaris for Linux - back to its side with both Solaris 10 and a new fleet of Opteron gear. It held a similar event last year in New York. ®