MBA Research

Trend #51: Shifting Regulatory Requirements

President Trump is widely known for his stance on deregulation. He has delivered on his promises to relieve businesses of rules that many feel restricted growth and interrupted productivity. Last month, he held a press conference to announce that he has negated or deferred more than 1,500 planned regulatory actions since he took office. February’s Action Brief looks at the effects of deregulation on business.

While the connection between regulations and the growth of business are heavily debated, what’s clear is the buoyancy with which businesses are moving forward in anticipation of continued deregulation. This confidence is being credited with increasing investments, a rallying stock market, more hiring, and a surge of spending, especially in the manufacturing sector that has resulted in new plants, equipment, and factory upgrades. In addition, energy companies have benefitted heavily from President Trumps reversal of environmental protections. Comcast announced that it would invest more than $50 billion in infrastructure leading up to 2022 based partly on the repeal of net neutrality rules.

As businesses are hiring more workers, they are increasing investments in technology to help make workers more efficient and to address worker shortages. Wendy’s is adding self-service kiosks at 1000 restaurants. While the move is expected to shift employment to other areas, it is also expected to increase efficiencies and help give younger customers an ordering experience with which they are comfortable.

 President Trump has relaxed rules related to job training and apprenticeship programs. Several studies show that regulatory costs are either no longer the top concern of executives or are rapidly losing ground to the bigger concern of labor shortages.

Not all executives and business owners are happy. Many small businesses, while generally favoring fewer rules, are concerned about “regulatory whiplash” based on rapid deregulation that can be costly and hard to keep up with. Many changes require research, legal intervention, and human resource efforts which not all small businesses have at their disposal.

While oil and gas executives generally welcome Trump’s deregulation efforts, there is caution among some in the industry that loosened regulations could result in a major disaster (such as BP’s oil spill in the Gulf in 2010) which could tarnish the industry’s reputation and ultimately result in even tighter regulations than what are currently in place.

The National Association of Home Builders and the National Association of Realtors were concerned with President Trumps reversal of a cut in annual insurance premiums on many new FHA mortgages. According to the National Association of Realtors, the move by President Trump will increase home buying costs for approximately 850,000 home buyers and nearly 40,000 potential home buyers will not be able to afford homes at all due to the increase.

Executives across the U.S. are keeping close tabs on further deregulatory action. Some executives are also considering potential consumer backlash to changes. Watching and listening to what is happening at the national political level is crucial for executives determining how changes will affect their business. Tracking legislation can be helpful but time consuming. State and national trade associations often track legislation and are a great source for seeing what may be ahead.

Classroom Implications

Helping students understand issues around regulation/deregulation is important This article will help them understand some of the basics and explore some examples of deregulation.

Give students real-world examples of regulatory requirements that may be relevant in their own lives. This article gives an in-depth example of how government and private business regulations affect one family’s apple growing business.

Have students think about how rules apply in their own lives. Have them identify an example of a rule in their family, school, or work that they would like to have removed. Ask them to identify pros and cons of removing the rule. Conversely, ask them to think of a rule or regulation they feel should be added, and have them list the potential effects.

Issues around government regulations can be divisive and polarizing. Often, it seems that people debating these issues are looking at them through the lens of their political party without thinking beyond those lines. It’s not unusual to see issues around government regulation being debated heavily and even argued about on national television. One of our readers, Rusty Poeppelmeier, a Bond Manager at Liberty Mutual Surety, has the following advice for students working to develop opinions about the regulatory environment (or other issues being hotly debated right now)

  • Listen first, judge later.
  • Take time to get to know information about the issues—don’t make decisions based on perceptions or “party” lines. Do your own research if needed.
  • Ask the other side to share their viewpoint—and then listen carefully and ask questions.
  • If you realize your stance is wrong, move to the other side and be a part of the solution.
  • Always search for compromise.
  • When standing alone on an island with the right position, stand awhile longer and explain your views.
  • And remember---winning isn’t everything.