Recently Alan Greenspan spoke out about his thoughts on passage of the Dodd-Frank legislation and its potential impact.
“These ‘tips of the iceberg’ suggest a broader concern about the act: that it fails to capture the degree of global interconnectedness of recent decades which has not been substantially altered by the crisis of 2008,” Greenspan said. “The act may create the largest regulatory-induced market distortion since America’s ill-fated imposition of wage and price controls in 1971.”
Barney Frank quickly responded: “Mr. Greenspan is wrong on both counts. His rosy view overlooks a monumental crisis that threatened the foundations of the American economy, led to soaring unemployment, a continuing foreclosure crisis and weakened economies in the U.S. and Europe. It would have been a grave mistake not to address problems of inadequate regulation and lax oversight. Indeed, both his predecessor and successor as chairman of the Federal Reserve called for substantial changes and helped to shape the new rules.”
Ted Dysart
While the government tries to determine the regulations that will take effect, boards need to be prepared for whatever regulations will be implemented. The best way for a company to be prepared is to have the strongest board possible. But even the strongest of boards can be accused of being caught “flat-footed” when crisis arises.
What defines a strong board? The truth is that every board is different for a reason. Analysts, shareholders, top level executives and even customers/clients in all industries have a variety of opinions as to the right mix of board talent. Of course over the years there have been increased considerations for financial expertise, diversity, M&A/turnaround expertise and risk oversight.
What is next? One certainty is that it will be harder over time to elect a director who is not truly qualified or does not meet the qualifications the shareholders want to see. It is important for boards to have an eye toward the future in order to make informed decisions as people exit the board or approach retirement.
Directors have heard us talk in the past about “the right mix.” Now, more than ever, it is important to keep an eye on the government and what will come of any proposed legislation. How the Dodd-Frank Act and other proposals will impact companies still remains to be seen. Smart choices now can make any regulatory implementations easier to handle. Will we see a mandate to split the Chairman and CEO roles? What will Risk Management mean in the future? What level of oversight is necessary to meet shareholder expectations and to keep companies from repeating mistakes from the past? What legislation is needed for CEO Succession Planning?
So many things to consider and, undoubtedly, so many things we have yet to think about.