Corporate America Supports Most Financial Regulatory Reforms

As Congress continues to debate the most sweeping financial regulatory overhaul since the Great Depression, leaders at Fortune 1000 corporations are weighing in. According to a Makovsky + Company study, Corporate America favors the proposed financial reforms, and additionally, across all 8 reforms about which they were queried, only 28% of senior executives, on average, believe the proposed legislation will have a negative impact on the U.S. economy.

“Given the backdrop, and the fact that the survey also shows that 64% of executives believe the U.S. is on the wrong track, the financial crisis and slow economic recovery may still be at the root of executive concerns, thereby correlating with their support for financial reforms as a remedy”

Commissioned by Makovsky + Co., a leading global, independent public relations, investor relations and branding firm headquartered in New York City, and conducted online by Harris Interactive® in April 2010, the survey of Fortune 1000 executives found that they generally support 6 of the 8 core proposals for regulatory reform (see below for how reforms were defined to respondents). More specifically:

• 72% support regulating credit rating agencies
• 69% agree with proposals to close regulatory loopholes for derivatives and other complex investment packages
• 68% support the creation of a consumer protection agency
• 66% back the formation of a new regulatory agency to assess risk at financial institutions
• 66% agree with strengthening bank supervision
• 56% support the Volcker Rule

The reform that registered the greatest opposition, with 43% of executives opposing, was the right of the government and shareholders to influence senior executive compensation. The reform that had the least support, at 50%, was the Resolution Fund, a government process for shutting down large troubled firms viewed as “too big to fail.”

The latter two reforms, executives believe, would also have the greatest negative impact on the U.S. economy. With the exception of these two reforms and the Volcker Rule, slightly less than half believe the proposed reforms will have a positive effect on the economy and almost an average of 20% believe it will have no effect at all. The “executive pay” reform, corporate leaders believed, also would have the greatest negative impact on their particular corporation (40%) as well as them personally (34%).

“Given the backdrop, and the fact that the survey also shows that 64% of executives believe the U.S. is on the wrong track, the financial crisis and slow economic recovery may still be at the root of executive concerns, thereby correlating with their support for financial reforms as a remedy,” said Scott Tangney, Executive Vice President and head of the financial and professional services practice at Makovsky + Company.

While the large majority of executives were aware of most of the reforms, they were least aware of the following: the Volcker Rule (56%), the Resolution Fund (55%), and Systemic Risk Regulation (54%).

Asked if the reforms would make executives vote differently in the upcoming elections if they were passed, the data reflected overall uncertainty. An average of 30% felt it would make a difference, an average of 43% said it would not, and nearly one-quarter were unsure. Specifically, the study revealed, 37% of executives would vote differently if there were regulatory changes regarding government and shareholder influence on executive compensation, 32% would vote differently if bank supervision was strengthened, and 32% would change their vote if there was the creation of a consumer protection agency. In contrast, 41, 45 and 46% said the passing of these reforms, respectively, would not make a difference in their vote in the upcoming elections.