Private Equity And Compliance Culture

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When was the last time you heard someone use "compliance culture" in a positive way? Believe it or not, there was a time when creating a "culture of compliance" was all the rage within corporate American and on Wall Street. But it seems far less popular today.
With a bit of distance from the corporate and accounting scandals of the turn of the century, it seems that many observers are more worried that the emphasis on compliance culture may have gone too far. Yesterday, CNBC showed up Maria Bartiromo's interview with Blackstone Group CEO Steve Schwarzman and BlackRock CEO Laurence Fink. What struck us as surprising was not that Schwarzman was critical of compliance culture but that he leveled his criticism so casually, as if his point was obvious. What's more, his point did not meet with any objection from Bartiromo or Fink.
Here's how CNBC describes Schwarzman's remarks:

Schwarzman praised the private equity sector not only for its profitability, but for the "enormous good" it does for the economy. He said that the sector can undertake "certain things" that publicly traded firms cannot, citing the squeamishness that public companies' "emphasis on quarterly earnings" creates.
Schwarzman lamented the timid "compliance culture" engendered by the Sarbanes-Oxley Act, saying it exacerbates the tendency of boards to shy from long-term strategies as they try to "please shareholders" in the short-term.


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