The results of the '06 midterm elections are in, and when the 110th Congress convenes in January, there will be quite a number of new faces bringing with them a number of new priorities–that includes several activist Democrats leading committees pivotal to business interests. Should executives be concerned? Let's just say Bette Davis' immortal lines in All About Eve come to mind: You know the ones: "Fasten your seat belts. It's going to be a bumpy ride!" In the House, one of the most prominent appointments is probably that of Massachusetts Congressman Barney Frank as chair of the House Financial Services Committee. Rep. Frank has made no secret about his feeling that some kind of cap needs to be put on executive compensation. He also does not seem to be giving Sarbanes-Oxley legislative reform a very high priority. Instead, Frank wants to see if the Securities and Exchange Commission and Public Company Accounting Oversight Board can fix the problems with the statute through the regulatory process.
Then, there is also the return of Michigan Congressman John Dingell as chair of the House Energy and Commerce Committee. An activist legislator, Dingell is likely to set his sights on reclaiming jurisdiction over the Financial Accounting Standards Board and accounting issues, as well as some kind of increased regulation of the insurance industry. Finally, New York Congressman Charles Rangel will be leading the powerful House Ways and Means Committee and is likely to call for a return to a "pay-as-you-go" system of granting tax cuts, which could mean corporate tax increases to offset any tax cuts Congressman Rangel might have in mind for middle-class Americans.
On the Senate side, the new Democratic majority is likely to take seriously corporate complaints about regulatory compliance and disclosure require- ments, given that many of the members of key committees from both sides of the aisle have received years of political support from the financial services industry, Wall Street, insurance companies and the Big Four. For instance, New York Senator Charles Schumer is already on record expressing grave concerns about the long-term viability of our capital markets because of the current regulatory overload.
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Connecticut Senator Chris Dodd, the new chair of the Senate Banking Committee, is less committal about what to do about Sarbanes-Oxley, for instance. But coming from the home base of the FASB as he does, Sen. Dodd is well aware of the frustrations auditors and preparers have with the growing complexity of financial reporting standards, and it is hard to see a scenario in which Senate Banking would not take up the issue.
Two things companies can count on from a Democratic Congress: a minimum wage hike and changes to Medicare's prescription drug plan. The first will mean a hit to profits, but Medicare changes could reap savings for companies offering retiree health–assuming President Bush doesn't veto.
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