Fortune 1000 Senior Executive Survey on Financial Reform

A 2010 Makovsky + Company / Harris Interactive Study

Status: “Go”

Most Executives Support Key Planks of Financial Regulatory Reform

 Laissez-faire?  Maybe it’s time to reconsider the defining mood in the executive suite.  A new Makovsky survey shows that 50% or more of America’s business leaders support each of the eight proposals that form the core of financial regulatory reform.

The survey finds corporate America dissatisfied with the status quo.  Far from complacent or unduly conservative, they seem as a group ready to support changes that together represent the most sweeping financial regulatory overhaul since the Great Depression.  Pluralities of greater than 40% have rallied behind five of the eight government proposals as clear good news for the American economy; majorities are positive-to-neutral regarding the economic impact of the other three.

Specific reforms painted in some corners as government “red tape,” in fact, garner solid support from the executives surveyed.  This includes the creation of two new federal agencies: a consumer protection bureau and an organization to monitor the financial landscape to assess threats before they cause another crisis.

Of all the proposed reforms, only the executive pay and shareholder rights proposals stirred notable controversy.  Forty-three percent oppose giving boards, shareholders and regulators greater influence in electing directors and in setting executive pay.  The government resolution fund, designed to insure the orderly shutdown of firms deemed “too big to fail,” was opposed by 37% of the survey respondents.

Fig. 1 - Executives generally support 6 of the 8 reform proposals:

Fig. 2 - Executives were least aware of:

Reform: The Rx for Recovery
In the executive suite, support for financial reform is a push-pull phenomenon.  The survey suggests that most Fortune 1000 business leaders have a good understanding of each reform proposal, and that their attraction to the package is based on knowledge, not impressions.

At the same time, most are also repelled by the status quo; just shy of two-thirds told us that the U.S. economy is “on the wrong track.”

In short, it is clear that a majority of America’s  business leaders are prepared to lend their support to financial regulatory reform as way to address the systemic risks that they believe are serious impediments to a sustained recovery.

Moving Forward
Everyone has a stake in a transparent and fair financial system, one where risk can be readily identified, understood and addressed.  This survey suggests that America’s business leaders are in the vanguard of weighing and embracing government reforms that hold the promise of creating a stronger and more resilient economy — even if it could mean short-term discomfort for themselves and their businesses.

It behooves business leaders to let their views be known, to correct misperceptions and to engage in an open dialogue with government, shareholders, employees, customers and other constituents.  The survey suggests that there is a strong base from which to address these messages.

• For all eight reforms, the plurality of executives say the passing of the reform would not affect how they vote in the upcoming elections
•  The three reforms most likely to impact executives’ voting behavior are: executive pay and shareholder rights (37%), bank supervision (32%), and consumer protection (32%)
• The largest segment of executives believe that reforms will have no effect on them personally
• Forty percent of executives believe that shareholder rights and executive pay provisions will have a negative impact on their corporation

How the Reforms are Defined

• Bank supervision:  Reorganize and strengthen supervision of the nation’s banks.
• Closing regulatory loopholes:  Regulate over-the-counter derivatives, hedge funds, and brokers of mortgage-backed securities.
• Consumer protection:  Creation of a financial consumer protection agency to regulate mortgages, credit cards, and other financial products.
• Credit rating agencies regulation:  Creation of a new Securities and Exchange Commission (SEC) Office of Credit Rating Agencies that would be responsible for strengthening regulation of credit rating agencies and setting up penalties for poor performance.
• Executive pay and shareholder rights: Increase independence of corporate compensation committees, and give regulators and shareholders greater influence in electing directors and making decisions about executive pay.
• Resolution fund:  Develop a new government process for shutting down large, troubled firms that are viewed as “too big to fail.”
• Systemic risk regulation:  Creation of a new regulatory agency to monitor the financial landscape, assess risk, and manage threats to stability before they cause another crisis.
• Volcker rule:  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.

Makovsky Financial Services
Over the past thirty years Makovsky has established a reputation as one of the premier financial services public relations agencies in the United States, working with clients in every major sector of this complicated and demanding specialty.  

Institutions

•   Investment Banking
•   Commercial Banking
•   Retail Banking
•   Brokerage and Asset Management
•   Investment Companies/Mutual Funds
•   Insurance
•   Financial Technology
•   Benefits Consulting

 About Makovsky + Company
Founded in 1979, Makovsky + Company (www.makovsky.com) is one of the nation’s leading independent global public relations, investor relations and branding consultancies, focused in financial services, professional services, health care, technology, energy and branding and interactive.  The firm attributes its success to its original vision: that the Power of Specialized Thinking™ is the best way to build reputation, sales and fair valuation for a client. Based in New York City, the firm has agency partners in more than 25 countries and in 35 U.S. cities through IPREX (www.IPREX.com), the second largest worldwide public relations agency partnership, of which Makovsky is a founder.

About the Survey
Harris Interactive^® conducted the survey online for Makovsky + Company within the United States between April 6 and 16, 2010 among 300 Fortune 1000 Executives.