Elected officials in Texas are now experiencing what compliance professionals experience all the time.
On the one hand, the elected officials in Texas could choose, as they in fact did, to deregulate the energy market. Energy companies would then, of course, act to maximize profits. Energy companies would not winterize their facilities, because that would cut into profits. And, when the deep freeze arrived in 2021, millions of people would lose power.
Elected officials would get the blame: How could they be so foolish as to deregulate the energy market? Why didn’t government require the companies to winterize? Why do we elect such fools?
But assume a counterfactual: Ten years ago, when Texans were warned that a severe winter storm could upset the electricity supply, elected officials did in fact choose to regulate the energy market. The hypothetical new laws required that all facilities be winterized to withstand a one-in-a-century freeze. The cost of winterization would of course be passed on, either in the form of higher rates for electricity or higher taxes.
In winter 2021, the deep freeze hit.
Nobody lost power.
Elected officials would still get the blame: Why have rates for electrical power been so damn high? Do you know how much of my income is eaten away by my electric bill? Why is the government doing this? Why do we elect such fools? And, by the way, we never lose power. Those crazies in government are planning for storms that never happen! Have we lost power recently? See what I mean?
Pity the poor politicians in Texas.
And pity the poor compliance professional.
Allocating scarce resources, the compliance professional cannot eliminate all risk. So there’s always a chance that a compliance violation will arise somewhere in the company: Trade sanctions, privacy, mandatory disclosures, whatever. Compliance can’t protect completely against all risks; it allocates resources and leaves open the possibility that disaster will strike somewhere within the company.
Disaster strikes! How could the compliance department have been so foolish as to fail to protect against this risk? Why didn’t they hire more people focused on this particular risk? Why didn’t they develop better controls? Why do we hire such fools?
On the other hand, assume that disaster does not strike. Compliance still takes the blame: Why does the compliance department spend so much of our corporate money? Nothing bad ever happens to us. We’re never out of compliance. But we spend a ton on that silly compliance department; shouldn’t we cut their budget?
Preventing disasters is a thankless task.
No one ever notices when a disaster is avoided. Life simply goes on as usual; the dog didn’t bark. And people complain about the ongoing cost of seemingly achieving nothing.
But everyone notices when a disaster strikes. And then everyone blames the disaster-preventer: Why didn’t you see this coming? Why didn’t we spend more money to avoid this? Why do we hire such fools?
I suspect that compliance professionals around the world feel some pity for the poor politicians in Texas.
Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Drug and Device Product Liability Litigation Strategy (affiliate links). You can reach him by email at firstname.lastname@example.org.