Strategy is about finding a way around constraints. In military terms those constraints have to do with the political objectives chosen, the enemy and logistical constraints of all sorts. The strategist is looking for ways to exploit opportunities to get around those constraints. In the economic world and the world of finance it is still about looking for the edge.
Regulations are designed to prevent people from unfairly exploiting opportunities.♠ The thing about regulations is that there is always going to be someone looking for a way around them. That is, right up to the point that regulations bring the market to a standstill. In the mean time, the regulators will always be behind the smart men and women who are the strategists, the ones trying to find the holes in the regulations and the markets that they can squeeze through.
And, I think that is what Mr Paul Atkins is trying to say in today's Wall Street Journal.
As an aside, I am wondering if anyone has done any serious examination of the impact of the Sarbanes-Oxley Act. Being down in the corporate trenches, my experiencer is that it has created a great big bureaucracy, but has not really increased transparency or honesty. But, it has irritated the little folks who make the corporation run and made their life worse.
Regards — Cliff
♠ Since this is in the context of the US economic system, I am going to assume that the US Congress is not going to be producing regulations that will distort the market to unduly favor one side over another or introduce corrupt practices.
4 comments:
Speaking as an avid paycheck-casher from a major application software provider, I can attest first-hand to the boom in overhead expenses, including purchases of new software, that go along with the SOX regulation.
I can also say first-hand that it has produced what I would describe as a positive climate of vulnerability among conscientious managers that has, along with it, produced positive results in the way businesses account for their "strategies". (I have overheard countless times, in the motivational speeches senior executives give their underlings, that, since their signatures are going to go on the financial statements, they better be according to Hoyle).
These sorts of communications down the chain of command have a tremendous impact on the culture of "strategy" vs. cheating that can go on down below. The Goldman perps down in the boiler rooms were motivated by messages that weren't quite so on the up-and-up, and we've seen the results there.
Of course, the question of whether the expense is worth the benefit is hard to discern. I, for one, am for anything that increases the scrutiny on, and accountability of, corporate criminals. And I've seen so many I couldn't even count them anymore for you. (But ask me some time to tell you about the more noteworthy among them--the stories are always fun to tell, even if they do leave a nauseous pit in the bottom of the stomach).
My experience has not been the same as that of Kad Barma, but his experience gives me hope that there is some value and intelligence to Sarbanes-Oxley.
Regards — Cliff
Reading my comments I realize I failed to adequately stress the qualifier "among CONSCIENTIOUS managers". As rosy as my first comments make things sound, I've also found, among less-than-conscientious managers, that SOX merely creates one more set of books to cook. Cheaters are still cheating, and SOX hasn't stopped it by any means.
I just mean to say that SOX gives those making a positive example reason to make that example clearer throughout their organizations, and that's a positive change.
My preference would be to make penalties for white-collar crime MORE drastic than for in-person 1-on-1 crime, on the premise that white collar criminals ruin the lives of far more people far more consistently, and are far more likely to continue to offend unless the penalties (finally) outweigh the advantages.
Seriously--if I were king, then Bernie Madoff would have been strung up by his testicles long ago, along with ALL of the people who aided and abetted his fraud. (Many of whom still do business here in Massachusetts as if nothing has happened).
I think it is worth noting.....and emphasizing.....that laws (and rules) are designed to keep honest people honest...and generally...as we have seen...they do a good job of achieving that goal.
Regarding the regulators being behind the strategists, I think that is in error. As we've discovered, the only thing they apparently are behind is their computer screen watching government paid for porn. There is something that society finds irresistably "delicious" when we uncover the dark sides of our icons of purity. American society was positively enthralled with the moral downfall of Oral Roberts. We LOVE taking down people who we place on pedestals......
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