Open Letter To Obama: Let Tech Cover "Compliance Tax"

By John H. Capobianco, Lumigent Technologies, Inc.

Please accept my sincere congratulations on your victory. You were elected on a platform of change, and perhaps the most pressing change the United States needs to make involves the economy and our confidence in our American corporations.

Today, people are wary of Wall Street, and the overwhelming, bi-partisan consensus favors more regulation, more oversight, and more accountability. These sentiments will likely persist well beyond January 20, and they may influence your policy decisions.

Some may oppose new regulations on the grounds that they will hamper companies, their competitiveness, and ultimately, the economy. Even those who support them must concede that regulations necessarily impose additional costs on the companies that must demonstrate their compliance — a "compliance tax," in effect. These considerations, too, may play a role in your choices.

I can attest to the high cost of compliance. The company I took public two years ago wound up paying a compliance tax of $2.2M per year as annual spending in our finance department soared from $300,000 to $2.5M, mostly to cover manual compliance reporting. And the $2.2M did nothing to improve our products, market share, competitiveness, profitability, or our customer satisfaction.

Compliance taxes may be a price corporate America pays to help renew confidence and revive our economy. The tax, however, is paid in business processes rather than contributions to the greater good. For that reason, corporate America is in the position to give itself a compliance tax cut that has zero impact on its ability meet underlying regulations. In keeping with your demonstrated belief that technology will unburden America and advance us as leaders of the free world, I believe automation of manual processes is the key to business competitiveness.

Simply put, much of the manual labor associated with compliance goes into addressing auditor inquiries about deficiencies, material weaknesses, and the like — all of which can be handled by software. Now, people that used to spend hours auditing controls by hand can be reassigned to profitable tasks. And the compliance tax can be radically shrunk.

I do not advocate or challenge regulations, per se. I merely advise corporate America to exercise the considerable control it has over any compliance tax it faces. The result will be the equivalent of having our cake and it eating it, too — oversight and accountability without onerous costs.

John H. Capobianco is president and CEO of Lumigent Technologies, Inc., the first to market with automated financial controls for primary business applications to drive down the cost of regulatory compliance. You are invited to publish this viewpoint in part or in full; and you can learn more about Lumigent at http://www.lumigent.com.

SOURCE: Lumigent Technologies, Inc.