Here's a question for compliance officers: How are preparations going for compliance with the Conflict Minerals Rule? What's that? They are on hold pending a legal challenge to the rule?
How about bank executives, are you ready for the Volcker Rule? Huh? You say you're not because you still don't know what the final version will entail two-and-a-half years after the legislation was signed?
Accountants and auditors, are you ready for the massive switch to International Financial Reporting Standards? Oh, there's been no decision on that, even though the Securities and Exchange Commission promised one by last year?
I could go on and on with examples of rules and regulations that have been tabled, back-burnered, shelved, or stuck in a time capsule and labeled with instructions not to open until 2015. Nearly every agency that writes rules and regulations for just about every facet of business is guilty of foot-dragging to some degree.
Things have gotten so bad over at the SEC that last summer it quietly removed the estimated dates from its timeline of when it would finish writing different Dodd-Frank Act rules. In effect, the agency was saying, “we don't really know when they are going to get done, so let's just stop pretending.” It wouldn't be surprising at all if the next crisis to hit Corporate America happens while we are still responding to the last crisis, now more than four years in the rear-view.
The endless delays and deferments are part of a broader trend among government entities to put tough decisions and problem solving off into the distance. We elect our leaders with the understanding that they, and the people they appoint to top positions, will make the tough decisions. More recently, though, the government has become a bastion of procrastinators and can-kickers.
It's as if the legislative gridlock and partisan paralysis in Congress have filtered down into the regulatory appendages of government. A parallel can be drawn between the way that members of Congress have continually postponed decisions on such vital issues as the debt ceiling, sequestration, and changes needed to preserve Medicare and Social Security, and the failure of regulators to finalize important regulations, such as the Volcker Rule or new disclosures on CEO pay.
When a decision is tough to make, controversial, or the best way forward is likely to anger an important constituency or the politically powerful, the decision is almost always to put it off for a few more months and take it up later.
A great example is the rules needed to carry out the Jumpstart Our Business Startups Act. The JOBS Act, as it is known, was intended as a quick shot in the arm to provide funding to small businesses so they can hire more people. Moreover, it enjoyed broad bi-partisan support, and legislators filled in most of the details when writing the bill. The urgency was right there in the name. But here we are, more than nine months after the law was signed and rules for the cornerstone provisions of the JOBS Act, crowdfunding and ending the solicitation ban on private security offerings, have yet to be finalized. That's not going to jump-start anything except the blood-pressure of those who are waiting for the rules to take effect.
With an economy dragging, these delays and tabled decisions are devastating to businesses. Ask any compliance officer what their biggest concern is right now and they will tell you it's the amount of regulatory uncertainty they face. How can they budget? How can they staff? How can they plan their compliance efforts, when they don't know what they will be complying with?
To be sure, some of the regulations that are awaiting action are complex, and regulators need time to consider all of the input and potential unintended consequences of the rules they are writing. True too that companies would rather have well-conceived and thought-out rules than hurried regulations with vague language and incomplete details. And certainly the idea that regulators are slow to act or that they delay tough actions isn't exactly a new phenomenon. But as months turn into years, compliance departments end up in regulatory limbo—preparing for a rule that doesn't yet exist while trying not to put too many resources toward something that could look very different in the end, whenever that is.
It's a bad place to be.