Georgetown's McDonough School Hosts U.S. Financial Leaders
Washington, D.C. -- The U.S. should consider whether it makes sense "to move toward a more principles-based regulatory system," Henry M. Paulson, Jr., U.S. Secretary of the Treasury, told an audience yesterday of students, faculty and global media at a conference hosted by the McDonough School of Business.
Paulson led a discussion among leading corporate and financial experts on whether business regulation has gone too far in the wake of the Enron and other scandals. Joining Paulson on the stage of Gaston Hall were Warren Buffett, Chairman and CEO of Berkshire Hathaway Inc.; Michael Bloomberg, Mayor of New York City; Alan Greenspan and Paul Volcker, former Chairmen of the Board of Governors of the Federal Reserve System; Jeffrey R. Immelt, Chairman and CEO of the General Electric Company; Robert E. Rubin, former Secretary of the Treasury; Christopher Cox, Chairman of the Securities and Exchange Commission, and others.
According to The New York Times, the Bush Administration acknowledged that the conference was intended to "lay the groundwork for proposing changes" in business regulations before the 2008 election cycle begins.
During the first of two panel discussions, Buffett used a golf analogy to explain the effect of post-Enron regulations. "It's like golfing when you hit two balls to the left and the caddie says to aim to the right. The world has told [corporate America] to hit it to the right for a while."
Buffett did not see the result as positive. He complained that the increasing regulation of corporate governance and financial disclosure have forced boards of directors to focus on issues unrelated to running a company. "It has changed what the board discusses," he said. "It has made the work more tedious and distracts from more important things that boards should be looking at."
According to John Thain, CEO of the New York Stock Exchange, regulatory changes have hurt investor confidence. He noted that in 2005, only one of the top 25 IPOs in the world took place in the U.S., compared to 9 of 10 in 2000. Among the reasons he cited were the costs of regulations, which he said had exceeded their benefits, the rise in class-action lawsuits, and "excessive and duplicative" regulation at the federal and state levels.
Immelt of GE, however, didn't jump on the bandwagon, cautioning his fellow panelists not to condemn all regulation. "We don't have to think of regulations as all negative," he said. He asked, however, that regulations be clear so that executives know the rules they are working under.
Buffett agreed that the system isn't broken. "Return on equity is the highest in the history of the U.S.," he said. "The percentage of profits to GDP is also the highest in history. So we don't have a broken capitalistic system."
The panelists also addressed a range of other topics, from accounting standards and investor protections to immigration policy and education reform. After the public session, Paulson led private discussions at Georgetown between the participants and other experts on regulation, corporate accounting and governance and legal liability issues.
Watch a video of CNBC's interview with Warren Buffett in front of Healy Hall at Georgetown at: http://www.cnbc.com/id/15840232?video=211630653
About the Robert Emmett McDonough School of Business
Georgetown University's McDonough School of Business is a premier business school located in the nation's capital. Founded in 1957 to educate undergraduate business students through the integration of liberal arts and professional education, the McDonough School today welcomes approximately 1,300 undergraduates, 620 MBA students, and more than 500 participants in its executive education programs annually. For more information about the McDonough School, visit http://msb.georgetown.edu
About Georgetown University
Georgetown University is the oldest Catholic and Jesuit university in America, founded in 1789 by Archbishop John Carroll. Georgetown today is a major student-centered, international, research university offering respected undergraduate, graduate and professional programs on its three campuses. For more information about Georgetown University, visit http://www.georgetown.edu