Economics

The Compliance Boom

When it comes to insuring compliance with government regulations, business is booming.

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There's a great scene in the 1967 movie The Graduate when an older man takes a recent graduate aside and says, "I just want to say one word to you, just one word…Are you listening?…Plastics."

If that movie were being remade today, and if the career advice were to be aimed at the class of 2013, the one word would be this: "compliance."

That is to say, the business that is booming is the business of making sure that American companies obey — or comply with — the ever-increasing number of laws and regulations that are being heaped upon them. This is the fault not only of the Obama administration but of the Bush administration before it, which did its part with, among other things, the post-Enron Sarbanes-Oxley Act.

Indeed, if there is a single fact that sums up the state of American political economy at the present moment, it is this: the Boston office building once home to Inc. Magazine and Fast Company, which chronicled and celebrated small and fast-growing businesses, is now the headquarters of a publication called Compliance Week.

The Wall Street Journal, which used to advertise itself as "The Daily Diary of the American Dream," this month launched its own "Risk & Compliance Journal."

And The New York Times, which usually devotes its "30-Minute Interview" feature to a real estate developer, last week featured the co-founder of SiteCompli, Jason Griffith. Founded in 2009, the company has 20 employees and plans to double that by the end of the year. Its business, the Times reports, is helping building owners "comply with the myriad rules and regulations within various New York City agencies."

"We are growing very fast," Griffith told the Times. "Our revenues have been up 1,200 percent."

At a time when companies are still reluctant to hire, the online job site Careerbuilder.com carries 2,588 job listings for compliance officers, the people who make sure companies follow all the rules, and who read Compliance Week (one year individual subscription, $1,199) and attend its conferences.

It's great to see that there's some sector of the economy out there that is "growing very fast." The businesses that are helping other businesses with their compliance seem to be providing something of value. And if some compliance officer helps to prevent a bank from ripping off its customers, or a chemical company from polluting a river, God bless them.

But for all that, the growth of this culture of "compliance" can seem jarring in a nation whose history is full of rule-breaking troublemakers. This week marks the 238th anniversary of the battles of Lexington and Concord, which Massachusetts recalls by making Monday a holiday, Patriots Day. When the Americans rebelled against Britain, they weren't being compliant. They were being noncompliant.

This year would also have been the 100th birthday of the civil rights heroine Rosa Parks, which the Post Office has marked with a stamp honoring her. There's also a new biography, The Rebellious Life of Mrs. Rosa Parks. She wasn't compliant, either.

The compliance officers will point out that being a compliance officer may sometimes mean rebelling against a corporate culture of noncompliance. Maybe so. But even the greatest conservative figures realize that rules are sometimes made to be broken, a point that was brought home to me last week in Washington at, of all places, a celebration of the life of, of all people, Judge Robert Heron Bork, who died last year.

A speaker at the event recalled that upon arriving at some event, Bork arrived at the bar only to find the bartender refusing to serve him. The bar had been ordered closed, because the cocktail hour was ending, and the crowd was supposed to make its way to be seated for dinner. Bork was insistent, telling the bartender that the "Nuremberg defense" wouldn't work with him.

I'm all for the rule of law, as was Judge Bork, who details as much in the new posthumously published book Saving Justice. But if America is to become a nation of compliance officers — and let's hope it does not — let's hope that they have the wisdom to realize that sometimes rules are there to be rebelled against. If we aren't careful, it may yet get to the point where Congress has to mandate that for every compliance officer a firm hires, it needs to hire a creativity officer as a counterweight.

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53 responses to “The Compliance Boom

  1. Jason Griffith. Founded in 2009, the company has 20 employees and plans to double that by the end of the year. Its business, the Times reports, is helping building owners “comply with the myriad rules and regulations within various New York City agencies.”

    Yep and just as soon as they get to 50 employees they’re all having their hours cut to comply with PelosiCare….or KuntKare as I have decided to call it!

    1. I should point out this comment wasn’t here when I typed mine. Only Fist of Etiquette is supposed to be the rest of us to the punch line!

      1. Sorry! My wife complains that I do things prematurely too!

        1. Do you do the pillow talk first?

          1. Do you do the pillow talk first?

            What kind of uncivilized savage do you think I am……of course there’s no pillow talk.

  2. Founded in 2009, the company has 20 employees and plans to double that by the end of the year.

    I don’t see them growing much further after the end of the year.

  3. They create thousands of new regulations every year, and even send a few people to jail for breaking them, but they “don’t have the resources” to enforce existing immigration law. Anarcho-tyranny indeed.

    1. ^This.

    2. I don’t understand your point. Immigration law is enforced or else there wouldn’t be any deportations at all. If you are referring to amnesty, not everyone who violates a regulation goes to jail either because it’s impossible to pinpoint every single person who breaks every single stupid regulation and round them all up and throw them in jail. I guess you could say all of those people are getting “amnesty” too.

      1. The Obama DOJ has states that it will refuse to deport certain illegals, despite their actions being illegal. It is not an impossibility to deport all the illegal immigrants, Israel has shown it to be a practical possibility. Breaking one business regulation once whereby it would be impossible for the state to know, and getting away with it, is not the same as breaking a law in the full presence of the government and the government stating that you will not be prosecuted for it. For it to be comparable a president Romney would have to find a regulation he doesn’t like and instruct his DOJ not to prosecute people for it.

        1. For it to be comparable a president Romney would have to find a regulation he doesn’t like and instruct his DOJ not to prosecute people for it.

          POTUS has the unlimited power of Presidential pardons. If I were elected, the very first thing I would do is pardon every single nonviolent criminal. Which, by the way, includes those damn Mexicans you seem to really dislike for some reason.

          1. A power that cannot be abused? The founders never intended for the president to pardon ten million people. Besides, that’s not what he did. Are you saying you support what he did?

            1. The Founders also never intended for the feds to be locking all these people up in the first place

              1. Two wrongs make a right now? And the founders gave the federal government the power to regulate immigration.

                1. “Two wrongs make a right now?”

                  Violating rights is not a right.

                  “And the founders gave the federal government the power to regulate immigration.”

                  First off, Virginian’s comment wasn’t even specifically about immigration. Reread it.

                  Secondly, no they didn’t. “Naturalization” does not, and never has, meant the same thing as immigration. The words are not synonyms.

                  1. I’m talking about throwing away the balance of powers established in the constitution. Funny, speech is the same thing as orgasms(see the other thread), but naturalization is totally different from immigration. If you read what the founders actually wrote they clearly were referring to both immigration and naturalization.

                    1. “If you read what the founders actually wrote they clearly were referring to both immigration and naturalization.”

                      That’s why there were very restrictive naturalization laws from the outset of the country’s history, despite the fact that we had open immigration? From the beginning, only whites could obtain citizenship, but laws had to be passed in the late 1800’s to exclude the Chinese and other groups.

                    2. There was no need for congress to establish laws in the beginning, but they nevertheless recognized the possibility of such laws being needed. They passed the laws against the Chinese, that is what has to happen under the constitution. If it had been unconstitutional they would have had to create an amendment for it.

                    3. “There was no need for congress to establish laws in the beginning, but they nevertheless recognized the possibility of such laws being needed.”

                      Why was there no need? Why was there a need to restrict naturalization to white men? Why didn’t they use the word “immigration” in the Constitution?

                      “If it had been unconstitutional they would have had to create an amendment for it.”

                      Because the federal government has never violated the Constitution?

        2. Did Israel deport over 10 million people?

          1. It’s all relative to the overall population, of course. But you knew that.

            1. How many did Israel deport? And more importantly, do you seriously think scale is irrelevant?

              1. If he’s talking about the events of 1948, it would be 700,000.

                1. A far smaller number. That also happened in a war, many of those fled, and deporting illegal immigrants in the US today is not really comparable to that situation.

                2. I’m talking about the events of this summer, the deportation of the blacks.

              2. During operation Wetback, two million were deported of voluntarily left. It is perfectly possible.

                1. Didn’t really solve the problem. People continued to cross illegally. Many of the people counted in deportation statistics were deported (and counted) multiple times. And today it would require several times that magnitude. And good luck handling the social turmoil such an operation would cause. Nor do I really want my tax dollars taken from me to forcibly deport people who have not violated my rights.

                  1. During operation wetback the majority of those who left did so voluntarily for fear of being deported, are you saying they later changed their minds and went back. The problem wasn’t solve because liberals said Operation Wetback was “racist” and stopped enforcing he law. If you think immigration is impossible to stop, see recent the case of Israel

                    1. “During operation wetback the majority of those who left did so voluntarily for fear of being deported,”

                      Source? It’s a fact that at least from 1960-61, 20% of deportations were repeat offenders. And today is an entirely different social environment than it was 50 years ago. There are far more illegal immigrants. The number of people connected to these immigrants (even if they themselves aren’t illegal) is far greater. If it couldn’t get done back then, what makes you think it could get done today?

                      “If you think immigration is impossible to stop, see recent the case of Israel”

                      Did you look at the numbers? The maximum monthly number of border crossings was slightly over 2,000. Israel is not a good comparison. It’s a much smaller country (both in terms of population and area and border length) with a far smaller illegal immigrant population.

                    2. Here you go:
                      It’s true that many were deported or induced to return “voluntarily” during the Truman years. We figure, based on the official historical tables, that more than 127,000 were formally deported and more than 3.2 million left voluntarily rather than face deportation.”

                      It WAS done back then, enforcement ceased in the sixties. Israel is a small country, with smaller resources and less people. If we devoted proportionally the same resources they devoted to building a border wall why could we not get a similar result?

                    3. That link doesn’t really support your argument. There’s not really any proof of how many left, just INS speculation (and we know how reliable the government is on reporting its own performance). Nor does it follow that most illegals would leave today. There would be a huge conflict (not necessarily violent) and I think you’re naive if you think they all would just leave and no one would say anything about it.

                      “If we devoted proportionally the same resources they devoted to building a border wall why could we not get a similar result?”

                      Scale. Proportions or not, things get more difficult to accomplish the more people and the greater area involved. You’re also really naive if you think people can’t get around, under, or over a border wall or fence. Nor should any free country be walled off from the rest of the world like that. And how does that solve the issue of the people already here?

                    4. “There would be a huge conflict (not necessarily violent) and I think you’re naive if you think they all would just leave and no one would say anything about it.”

                      Abolishing the welfare state wouldn’t be easy either.

                      “Scale. Proportions or not, things get more difficult to accomplish the more people and the greater area involved. ”

                      This is a country that put a man on the moon and we can’t even build a damned fence? You might not support it but you can’t say it’s impossible.

                      “Nor should any free country be walled off from the rest of the world like that”

                      I suppose you want Israel to take down their wall? How many Holocausts are enough for you?

                    5. “Abolishing the welfare state wouldn’t be easy either.”

                      Which is why pretty much anyone hear thinks it’s politically impossible in the foreseeable future. Not sure what you’re point is.

                      “This is a country that put a man on the moon and we can’t even build a damned fence? You might not support it but you can’t say it’s impossible.”

                      Building a fence is possible. That doesn’t mean achieving the goals you’re laying out is feasible.

                      “I suppose you want Israel to take down their wall? How many Holocausts are enough for you?”

                      Ok, so one more similarity with American. Draw a comparison to Israel and accuse your opponent of wanting another Holocaust. Was Israel on the verge of being wiped off the map before they built the fence along the Egyptian border? Are you saying the African immigrants were going to commit a second Holocaust? And once again, is the US situation even remotely comparable?

                    6. “Was Israel on the verge of being wiped off the map before they built the fence along the Egyptian border? ”
                      Yes. Those immigrants breed like rabbits, and they would have eventually out-bred the natives and as soon as they are in the majority, they, along with the Arabs, would have forcefully expelled the Jews from their lands, not to mention committed horrendous acts of terrorism that have killed a thousand Israelis so far, the equivalent of 60,000 dead Americans.

                    7. “Yes. Those immigrants breed like rabbits, and they would have eventually out-bred the natives and as soon as they are in the majority, they, along with the Arabs, would have forcefully expelled the Jews from their lands,”

                      LMAO. And do you even know what “on the verge of” means? And once again you dodge the main point.

        3. Yeah, it’s going to refuse to deport people who “broke the law” when they were 4 years old.

    1. Muy bono.

  4. My small business specializes in DME (Durable Medical Equipment) reimbursement. The rules for submitting claims for DME are so byzantine it takes dedicated experts to keep on top of the regulations. The whole industry is complicated beyond all reason and only getting worse. All while reimbursement is dropping and audits are increasing. Anybody know the lottery numbers for next week? I want out.

  5. I cannot begin to tell you the depth of the uselessness of the compliance infrastructure in place across the financial services industry. Literally millions of man hours are spent each year jumping through hoops, ticking boxes, attending brain-dead CE (continuing education) courses, generating reams of un-read documentation, and on and on and on…. when other things – very basic security practices, client vetting, establishing sources of funds – are basically left little room for ‘getting it right’ and often done in a rushed and haphazard way. All anyone cares about is covering their ass with the ‘regulators’ and end up not giving a shit about clients or their firm’s best interests.

    In short – I think not only is the modern compliance regimen *counter-productive* and harmful, that it isn’t even about what it claims to be about = its just a way for companies to put up mountains of legal string that shields them from the outside world. No wonder its so popular. God save us from Dodd-Frank.

    1. But Bush deregulated everything!

  6. Somewhat OT: Did anyone see this yesterday from @IraStoll?
    “Anyone still #standwithRand ? After today in Boston? How about Defense sequester? Not looking so bright at the moment.”

    I thought Reason writers had more class than that, but I stand corrected.

    1. I didn’t RTFA, because it was Stoll who wrote it. What a tool.

      1. I meant the article to which these comments are attached.

        1. Why Reason still employs him is a mystery to me

          1. I saw that on Twitter yesterday when Lucy retweeted it.

            I’m still trying to figure out what money Ira believes got cut from the sequester which magically would have stopped someone from blowing up two bombs during a marathon.

            1. He also tweeted something about how the ACLU was probably going to throw a fit about Gov. Patrick saying they needed to do random bag checks. It doesn’t seem Ira is a fan of civil liberties.

              1. Ira fits right in. Probably rides a fixie to the Whole Foods and attends a lot of gay weddings.

                1. Are those weddings preceded by cocktail parties? Or are cocktails just served during the reception?

  7. Here is an exact comment that I made in a meeting at work, around a month ago.

    “In the near future, 100% of all human effort in the workplace will be directed towards compliance with something, and documentation. No real work will ever be done. There is absolutely no other possible outcome if we stay on the present course.”

    One of my colleagues, who happens to be a lawyer and has to deal first hand with this crap all of the time, looked at me soberly and said, you’re right. I told her, I couldn’t do what you do, I would just fucking freak out and say fuck it. I have to deal with it enough directly, but direct involvement like that, yeah fuck that shit.

  8. I just spent 17 hours dealing with paperwork to comply with the Conflict Minerals Act because of the 2 million pounds of raw materials that we use, about 5 grams of tin is in there. That does not count the time I spent chasing our suppliers to get documentation from them as well. Probably 30-40 man hours were spend on this for 5 fucking grams of tin. I hope Africa feels safer now.

    OK, now to spend the next week dealing with paperwork for European REACH regulations.

  9. What an excellent name for a field whose raison d’etre is grovelling submission to the leviathan state.

    Motto: “We’ll help you OBEY!”

  10. You guys know what happened to the last planet that got rid of its telephone sanitation engineers?

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