The Trump Administration: How Regulatory Changes May Impact Businesses
In the snapshots featured here, we investigate what the Trump Administration may mean for U.S. companies. Campaign rhetoric of drastically reducing federal regulation and supporting American businesses suggests a relaxed regulatory environment in the years to come, but only time will tell the extent to which campaign promises become reality.
On January 4, 2011, The Food Safety Modernization Act (FSMA) was signed into law by President Obama. One of the most sweeping reforms of food safety laws in more than 70 years, it shifted the regulatory approach to food safety from responsive to preventative. Under the Trump administration, the continued implementation of FSMA remains uncertain; Trump’s campaign fact sheet stated that “the [FDA food safety] rules greatly increased inspections of food ‘facilities’ and levied new taxes to pay for this inspection overkill.” Coupled with his belief that “people flourish under a minimum government burden” and that regulations restrict the economy, it’s likely that we’ll see a decrease in food safety regulations in the months ahead. Nonetheless, other drivers for food safety — like customer requirements and brand reputation — are stronger than ever.
Data Privacy and Security
According to David Cowan of Bessemer Venture Partners, the election of Donald Trump will have “profound implications for the security of cyberspace.” Successfully preventing cyber-attacks is impossible without regulation, he argues, because “cyber neglect is like polluting, drunk driving, or refusing to vaccinate – it endangers not only the reckless, but everyone else as well.” The security of one online transaction or system depends upon the cyber ecosystem in its entirety, an ecosystem vulnerable to attack if Trump acts on his campaign promises of reducing rules, headcount, and spending of regulatory agencies including the SEC and FTC. Without regulatory pressure, “consumer-facing businesses will slash their own cyber security budgets, leading to weaker systems that further accelerate the growth and severity of information breaches,” and the private information of individual Americans may be exposed to hackers, foreign governments, and those looking to cash in on valuable datasets.
Anti-Bribery and Corruption
Ethics and compliance and ABC policies under the new Administration will be shaped largely by Trump’s nominees to direct the DOJ and SEC. Many experts predict that Jeff Sessions, nominee for head of the Justice Department, will continue the Department’s focus on white-collar crime. While Sessions supports the prosecution of corporations that commit financial fraud, Trump has expressed the opinion that “huge financial fines on corporations…harm innocent shareholders,” suggesting that sanctions like monitors and other non-financial measures are likely under the new Administration. Given Trump and Sessions’ common views on immigration, it’s also likely that DOJ prosecutions will shift to target companies that hire illegal labor, violate import/export laws, or fraudulently seek to avoid paying tariffs. Further, Trump’s historic criticism of the FCPA, coupled with the appointment of W. Jay Clayton (who helped publish a paper critical of the FCPA in 2011) to head the SEC suggests decreased enforcement of the FCPA in the years to come.
Worker Health and Safety
While Trump’s campaign commitment to “eliminate two regulations for every new one enacted” indicates a weakening in OSHA enforcement, the future of worker health and safety regulations is complicated by the fact that a large portion of the President’s electoral base would be hit hardest by deregulation weakening workplace safety or decreasing earnings for blue-collar workers. Experts expect the new Administration to scale back President Obama’s aggressive OSHA enforcement efforts and shift focus towards compliance assistance and high-hazard enforcement, and to limit the scope of OSHA’s whistleblower enforcement capabilities. Recent regulations like the injury and illness recordkeeping rule, the silica rule and the “blacklisting rule” (which requires firms seeking to do business with the federal government to report previous labor-law violations) will likely be scrapped under the Trump administration. In general, the next four years are likely to see a more “employer-friendly” OSHA.
This article originally appeared in Malk’s ESG in Private Equity Newsletter, sent out on February 8th, 2017. You can sign up for the quarterly newsletter here.