As Congress continues to debate the most sweeping financial regulatory overhaul in years, leaders at Fortune 1000 corporations are weighing in, and according to a Makovsky + Company study, they favor the proposed financial reforms. Across all eight reforms about which they were queried, only a 28 percent of senior executives believe the proposed legislation will have a negative impact on the U.S. economy.
The survey of Fortune 1000 executives found that they generally support six of the eight core proposals for regulatory reform. More specifically:
· 72 percent support regulating credit rating agencies
· 69 percent agree with proposals to close regulatory loopholes for derivatives and other complex investment packages
· 68 percent support the creation of a consumer protection agency
· 66 percent back the formation of a new regulatory agency to assess risk at financial institutions
· 66 percent agree with strengthening bank supervision
· 56 percent support the Volcker Rule (which would prohibit banks from proprietary trading and hedge fund ventures, and empower regulators to mandate large firms that are in distress to halt or divest risky businesses).
The reform that registered the greatest opposition, with 43 percent 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 percent, 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 percent believe it will have no effect at all. The “executive pay” reform, corporate leaders claimed, would have the greatest negative impact on their particular corporation (40 percent) as well as them personally (34 percent).
“Given the backdrop, and the fact that the survey also shows that 64 percent 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,” says Scott Tangney, executive vice president and head of the financial and professional services practice at Makovsky + Company.