Last week I attended a speech by Harvey Pitt, former Chairman of the Securities and Exchange Commission. His tenure ran from 2001-2003 and he is now working as the CEO of a global business consulting firm. The speech was targeted toward the students of the business school (of which I am not one), but I enjoyed myself anyway. Pitt spoke to a packed house (standing room only) and gave a quick bio (he loves his wife and both parents were both immigrants) and overview of his time at the SEC (he was General Counsel by 30). He went on to say that the SEC is an “institutional piñata” that is blamed for everything by everyone.
Admittedly, I do not know a lot about the SEC. A lot of the students looked antsy while Pitt explained the ins and outs of how the Commission operates and outlined his personal opinions on this such as the current Chairwoman (he likes and respects her but doesn’t necessarily agree with her) and how each of the five main departments should operate. I, on the other hand, really enjoyed it. The SEC, for example, is a lot like our government. It can make its own rules (like Congress, issue interpretations (like the Supreme Court and can adjudicate.
One thing that he Pitt spent a lot of time talking about was the transition from GAAP (Generally Accepted Accounting Practices) to IFRS (International Financial Reporting Standards). Basically, we use GAAP in the United States while the EU (over 100 countries total) uses IFRS. The last five SEC Chairmen supported a transition to IFRS and companies all over spent tens of millions of dollars to prepare for the switch. However, the new Chairwoman, Mary Shapiro, slammed the brakes on the efforts (including a step-by-step plan that had already been introduced) and now people are unsure of what is going to happen (and uncertainty is a very bad thing). Despite that, he admits that she was dealt a difficult hand and credits here with, “single-handedly keeping the SEC from going extinct.”
Another thing that he spent a lot of time talking about (and by that I mean criticizing) was the Dodd-Frank Bill. According to Pitt, “We are still in the throes of a hideous financial crisis,” and that Washington’s claims that the problem is resolved is false. He went on to criticize the bill for its length, stating that any question or problem that takes 2,313 pages to answer is not answering anything at all. Instead, he goes on to offer his own 3-step plan to solve the financial crisis:
1. Get a steady flow of information from anyone in the financial markets.
2. Assign clear responsibilities to ensure that something is actually done with the data – “Data is a roach motel – it always checks in but never checks out.”
3. Fix the law because it doesn’t make sense – Brokers, for example, are not held accountable for giving bad investment advice because they are not “investment bankers.” Plus, cost/benefit analysis is a “job for economists, not lawyers,” (referring to Congress).
In conclusion, Pitt offered his own tips to college grads that are entering the workforce soon. The tips were not targeted directly toward business school students and some of them offer great advice and insight. I’ll send you off with his words of wisdom:
1. Trust but verify – always do your own homework.
2. The value of transparency is key.
3. Decisions are only as good as the information they are based on.
4. Look for trouble before trouble finds you (as opposed to listening to the old adage, “Don’t go looking for trouble.”
5. Smart is good. Too smart is dangerous.
6. Haste will always make waste.
7. Sometimes selling short is okay, and sometimes following unconventional wisdom is okay, too.
8. *Personal Favorite: If you don’t speak up, no one will hear you.
9. The cardinal rule for dealing with the government is a quote from Vince Vaughn in Wedding Crashers: “A friend in need is a pest.” – If the first interaction is to ask for something, then you’re too late.
10. Avoid the Sarah Pitt Syndrome (his mother) – Just because no one tells you that it’s happening doesn’t mean that it’s not.
11. Keep a sense of humor (“If you don’t laugh, it only hurts that much more.”)
12. Don’t be a victim of your own success. Understand that success is based on opportunities, circumstances and sometimes pure chance just as much as it is based on hard work and dedication.
13. Being right can be overrated (even when satisfying). Oftentimes, the dialogue is more important than the outcome.