Congress and Business Structure

   In response to an argument that Congress should not often get into the business of structuring the governance structure of American business, a task it undertook in the Sarbanes-Oxley Act of 2002, SEC officials have noted that Congress has done it before -- in the Investment Company Act of the 1940.  This is hardly a rousing endorsement.  After the mutual fund scandals of 2003, the SEC has moved to increased structural control of mutual funds by increasing the percentage of independent directors on boards to 75% from 50% and to disable the fund managers from being chair persons of the board.  There is little or no data on whether this will work.  Why is 50% not enough and why will 75% be better?  Noone has a sensible answer.  The answer also overlooks two other acts that most believe have failed, the Public Utilities Holding Company Act of 1935, which Congress is trying to repeal and the Glass-Steagal Act of 1933, which Congress finally repealed in the late 90s.  Both acts structured a large segment of Amercian business, increasing operating costs and providing marginal and disappearring benefits.  Once passed, however, it takes years to correct the acts.  The belief in Congress's ability to struture business governance is hard to stifle, however.  Some are now claiming that the Glass-Steagal Act should be repassed.  We have a cultural pre-occupation with precedure and structure, believing that perfect results will follow perfect procedures and structure (which is false) and that government can discover and implement perfect procedures and struture (also false).  It is a utopian fantasy --- one that has real costs if allowed to become reality.