College of Business: University of Illinois at Urbana-Champaign

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Democratic Corporate Regulation


11/10/2010

by Sarah Small

Election Day 2010 was a time for citizens to exercise their right to vote and elect the leaders they deemed most suitable to guide the country through legislation and regulation. On Tuesday, November 2 in the Deloitte Auditorium, a lecture and discussion focused on the corporate response to such regulations. Jeff Brown, professor of finance and director of the Center for Business and Public Policy co-sponsored the event with State Farm to bring thought leaders together with members of the University and surrounding community for an illuminating hour and a half discussion.

Presenting were Tom McCormick, group compliance and ethics officer for BP, Ed Rust, chairman of the board and CEO for State Farm, and Roman Kulich, president and CEO of Coventry Group Health Plan. Each presented on how government regulations affect his job and corporation, and then Brown facilitated a question-answer session where he both asked questions and facilitated questions from the audience.
 
McCormick spoke about his role at BP where he is responsible for understanding and interpreting government regulations and ensuring all people working for or with the corporation are in compliance with those regulations. He also discussed how often people in business see these regulations as burdensome.
 
“I think what we have to realize is, it is true that most government regulatory systems are imperfect,” McCormick said. “They’re trying to regulate a lot of different business big and small, and so they’re not going to be particularly favorable or specific to a particular company.”
 
Often companies try to anticipate what regulations the government will impose and they walk a tight line to ensure compliance, but this technique of abiding by regulations eventually trips-up a company, he said.
 
“What I’ve learned is that in a business, any business, it’s far more sustainable and more successful to balance both the knowledge and the compliance with the rules, as well as more of the values and principles of doing business,” McCormick said. “If you get that part right, if you’re employees, contractors, third parties are operating with a set of values and principles that everyone shares at the company, compliance will follow.”
 
Roman Kulich also spoke of the importance of all employees in a corporation being on the same page in light of governmental regulations, although in a slightly different context than McCormick. Being the CEO of a health insurance-providing corporation, Kulich gave an insider’s perspective for what new health care legislation means for the industry.
 
Although not everyone in the industry was pleased with the new legislation, he said he encouraged the members of his team to accept the changes that had occurred and collectively direct their attention toward continuing success under the new regulations.
 
“We need to stay on top of the regulation,” Kulich said. “Interpretation of what is actually meant by the regulations is frequently challenged. And with respect to our regulators, we have a positive and proactive relationship with our regulators. We don’t want to be strangers with them when there is a problem.”
 
Basically, the new legislation is a bill to expand health care coverage, he said, and people in his industry are currently working to interpret the provisions in the legislation and well as design new ways to be successful while still complying with the new regulations.
 
Ed Rust, of State Farm, also spoke about the regulations in the insurance industry.
 
“Government regulations regulate a corporation’s ability to create jobs, provide goods and services and protect its investors’ funds,” Rust said. “As you lay that out you think that any corporation’s response to regulations is: none is best. Well, let me put that into perspective.”
 
He explained that the government should create regulations that are necessary and that have been thoroughly thought out. He also emphasized the importance of having experienced regulators in the field or industry that is regulated.
 
“My point is, as you look at regulation, it is, in making sure the process is thoroughly thought through,” Rust said.

Following the presenters’ remarks, attention was turned to questions from the standing-room-only audience. Students, faculty, and other visitors asked about the provisions in new health care legislation and BP’s response to regulation in light of the Deepwater Horizon oil spill, as well as the importance of insuring ethical practices among regulators.

The audience left the Deloitte Auditorium that Election Day with an insider's perspective on how governmental regulations provide unique challenges for corporations and knowledge about how corporations must evolve to work with, instead of against, regulators. They left with a better understanding of the complex relationship between legislatures, regulators and corporations, and better equipped to act at the polls.

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