So it's official: We're in a crisis.
As Emanuel suggested, however, in crisis lies opportunity. And among other areas, the Obama administration and 111th Congress will be looking for opportunities in regulatory reform, seeking to improve transparency and accountability.
On the other end of the political spectrum, Newt Gingrich has also identified a regulatory opportunity, calling for the repeal of the Sarbanes-Oxley Act to spur the economy. The law, he notes, was intended to prevent corporate fraud, but growing evidence suggests it has done more harm than good. I can appreciate his point, especially regarding the "hidden tax in yearly compliance costs."
When I took a company public two years ago, annual spending in our finance department soared from $300,000 to $2.5 million, mostly to cover manual compliance reporting — a "compliance tax" of roughly $2.2 million per year that delivered exactly zero benefit for my products, my consumers, my employees, or my company.
The knock against regulations is that they hamper companies, their competitiveness, and ultimately, the economy. Yes, regulations necessarily impose additional costs — the hidden tax — on the companies that must demonstrate compliance. With respect to Mr. Gingrich, however, I can't imagine popular opinion backing the repeal of SOX.
Overall, people are wary of Wall Street, and the overwhelming, bipartisan consensus favors more regulation, not less, as a way to restore the economy and our confidence in American corporations. But even if SOX is replaced by smarter, less destructive regulations, organizations will continue to pay the hidden tax to demonstrate their compliance.
Yes, we need better regulations. But we also need a better way to satisfy those regulations. We need a compliance tax cut.
Here, technology holds promise that Washington can't match. Software can automate time-consuming, regulatory compliance tasks previously done by hand. Financial compliance control systems can streamline compliance reporting, letting organizations comply with a growing number of regulations in a way that increases corporate transparency and visibility without introducing onerous costs that sacrifice competitiveness.
Let the politicians pursue their regulatory opportunities. In the meantime, businesses can pursue an opportunity of their own — a technology-driven, compliance tax cut that requires no government action whatsoever. As they're saying on Capitol Hill, don't let this crisis go to waste.
John H. Capobianco is president and CEO of Lumigent Technologies, Inc. You can learn more about Lumigent by clicking here and contact John by clicking here.