Based on the question asked above, I want you to think about the following organizations for a minute: Adelphia, American Express, Bank of America, Citigroup, Duke Energy, Enron, GM, Goldman Sachs, Healthsouth, Lehman Brothers, Lumber Liquidators, Marsh and McLennan, Massey Energy, Merrill Lynch, Penn State University, Toyota, Tyco, Volkswagen, and Wells Fargo.
What thoughts pop into your head? What do these organizations have in common? Yes, they have all been successful and many still are. The answer I am looking for is they have all been fined, publicly shamed or found guilty of some level of malfeasance, criminal neglect or fraud. The disappointing truth is I have been a shareholder in four of these organizations, so it hurts me both morally and financially, to see leaders forsake their roles as stewards of the company.
Volkswagen is the latest to join the infamous group. I was speaking with a Volkswagen owner the other day. While I was talking about the fine and decline in stock value around their purposeful fraud to avoid poor EPA emissions test results, he was thinking of it as a further depreciated car value. As with the others, what Volkswagen did was wrong and it will hurt them for a long while. The poor emissions will be hurting all of us until the cars are fixed. The CEO resigned earlier this week, and well he should, as a fraud like this has to be understood or even sanctioned at the very top. As of this writing, some car owners and shareholder groups are considering class action lawsuits against Volkswagen’s leadership.
Why do I bring this up today? Quite simply, we have politicians running on a platform of eliminating regulations so business can flourish. We often confuse bureaucracy with regulations. We need to investigate and remedy inefficiency in the latter, as bureaucracy can be antagonistic to efficiency. But, we need to also challenge ourselves to be smart with our regulations. If regulations are not efficacious, we should make changes, which might include their elimination. But, as evidence of the above well-known examples, which do not include countless others, doing away with regulations carte blanche would be unwise and foolish.
So, when you hear a statement like “we must do away with regulations,” ask yourself why? Who does that serve? The answer may be illuminating. I will leave you with a quote from Senator Elizabeth Warren who led the effort to create the hugely successful Consumer Financial Protection Bureau. This agency has fined several of the financial companies above for hundreds of millions for aggressive marketing and outright fraudulent practices, over 90% of which goes back to the impacted customers. In response to a question about why she does not like Wall Street, she said “I like Wall Street, I just do not like cheating.” Neither do I, nor should any of us.