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Taking the Politics Out of Proxy Season — That Would Be Nice!

“We dispute their numbers. We don’t have hard, concrete numbers, but we dispute them.”— Former White House press secretary Jay Carney
The Wall Street Journal recently published the attached article by James Copeland, entitled “Getting The Politics Out of Proxy Season.” It is an excellent piece and it’s last two paragraphs are of critical importance. They state:
“Using proxies as a political soapbox has costs beyond those directly incurred by companies to respond to the proposals.  Social-activist shareholders of companies that produce oil, pharmaceuticals, military equipment, cigarettes and agricultural products regularly leverage this process to generate press attention inimical to the companies’ core interests. Public-employee pension funds headed by elected partisan officials- most notably, those for New York City and state, respectively led by comptrollers Scott Stringer and Thomas DiNapoli-exploit the proxy process to browbeat companies into leaving trade associations and other groups that the officials view as unhelpful to Democratic Party interests.

The SEC’s legal mandate is to protect investors, facilitate capital formation, and promote efficient markets. Allowing social and policy issues to dominate corporate annual meetings conflicts with these goals. Here’s hoping that the agency revisits this issue and removes politics from proxy process, for good.”
Politics and regulation, they seem to go hand in hand, more so than they should, as the costs are huge. Unlike federal taxation and spending, there is no official accounting of total regulatory costs, including that of the advent of Dodd-Frank and all the proxy reform we are seeing—some good, some bad. Estimates range from hundreds of billions of dollars to more than $2 trillion each year. However, the number and cost of new regulations can be tracked, and both are growing unabated. The most comprehensive source of data on new regulations is the Federal Rules Database maintained by the Government Accountability Office (GAO). According to GAO data, 15,794 new rules were published from 2009 to 2014 in the Federal Register. Of these, 403 were classified as “major,” essentially defined as having an expected economic impact of at least $100 million per year. 
Unfortunately, the costs of politics’ regulations are felt in a variety of ways, including inhibiting economic growth, curtailing innovation and impeding job creation. The employment effects, while difficult to measure, can be substantial. Several reports we read say that by 2020, anywhere to five to seven million jobs could be lost due to over-regulation.   
It’s time to not only get the politics out of the proxy season—not to mention the hope that media outlets would report the numbers accurately—it’s time to look at how impactful regulation is on the productivity and job creation. The fear is that the very people who support over-regulation are going to be the same people left unemployed in the wake of increased rules. This idea should be a wake-up call to ensure this notion is never a part of our country’s economic future.

Here is the original Wall Street Journal article referenced above.

written by Brent Longnecker (Chairman & CEO) and Ian Keas (Manager) of Longnecker & Associates.

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