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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  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.

    1. Muy bono.

  3. 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.

  4. 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!

  5. 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?

  6. 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.

  7. 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.

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

    Motto: “We’ll help you OBEY!”

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

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