A Burdensome Regulation OR A Needed Protection?

“There ought to be a law against that!”

How often have we made that statement or heard others shout it out when someone does them wrong in a business transaction? Chances are pretty strong that there already is a law in place that was enacted to protect people and institutions from those same unfair or harmful actions. In the business world, these protective laws are more commonly referred to as ‘regulations’.

Nobody, however, likes to be regulated. Starting in infancy and extending through teen years and beyond, people tend to rebel against rules and regulations in deference to personal freedoms. Regulations pertaining to business tend to be inconvenient and sometimes very restrictive for business owners. Some regulations have even forced businesses to re-engineer or re-design their core products or services. Complying with these regulations often adds to the cost of operations and reaches into bottom line of corporate profits.

It is no wonder then, that when the new administration came into power in January promising to repeal or eliminate stifling business regulations, the stock market responded with a huge rally. The euphoria brought on by the thought of running a company with fewer regulations has inspired business owners to rekindle plans for investing in new hires and capital improvements.

Companies across the country have been complaining about the number of federal laws, regulations and restrictions enacted by congress or through executive action, especially since the financial crisis of 2007. State and local bodies have also added to the list of requirements businesses must follow.

Major legislation, such as the Dodd Frank Act, which laid out new laws aiming to rein in risky behavior by banks big and small, has become law of the land. Among other things, this law imposed stringent new mortgage-lending requirements, limited debit-card processing fees and created a new agency to enforce consumer financial laws, the Consumer Financial Protection Bureau.

The Consumer Financial Protection Bureau (CFPB) was launched in 2011 in the aftermath of the financial crisis as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The goal was to protect consumers from deceptive or misleading practices in the financial industry.

The Environmental Protection Agency (EPA), born in the wake of elevated concern about environmental pollution, was established on December 2, 1970 to consolidate in one agency a variety of federal research, monitoring, standard-setting and enforcement activities to ensure environmental protection. Since its inception, EPA has been working for a cleaner, healthier environment for the American people.

For over 100 years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.

All of these agencies share one common goal; protection of people, institutions, and resources from harmful, abusive and exploitive practices. But they come with a price tag. Compliance often requires additional reporting, modification, restriction, or implementation of procedural steps in delivering product or service. Capital requirements can put borrowing costs out of reach for small companies. Full disclosure can prove difficult and cumbersome to provide for risk filled investments. Emission controls standards and dealing with hazardous waste now dictates whole new manufacturing processes. All of these changes to the way business is conducted cost money and initial affect profits.

Businesses have dealt with the imposition of restrictive regulations in several ways. Some companies took the new regulations as an unfair affront on their liberties and decided to game the system. They devised ways to circumvent the regulations through illicit reporting or practices. Volkswagen diesel vehicles never met the emissions standard set by the regulatory bodies, but devised a software program that showed acceptable results when put through testing.

Other auto manufacturers took different paths and actually created innovative new power systems that became much more efficient and exceeded the standards. They sacrificed short-term profits, made a better product and advanced their technology to ensure long term stability and growth.

New renewable energy sources are emerging to meet the challenges to control fossil fuel emissions. Solar and wind power are now creating sound employment opportunities while growing our energy supplies all within the compliance standards our government has established.

Businesses can either choose to comply with the restrictions and accept the associated cost of regulations, or they can take a more optimistic stance and turn to innovation, creativity and inventiveness. Society demands fairness. Rules and regulations give everyone the freedom to pursue their personal and corporate goals on a level playing field. Companies that work within this philosophy produce strong dividends: Products have been made safer, cleaner, healthier, more dependable, and more competitive. All of society wins.