U.S. companies are more worried about the government impacting profits than a decade ago.
A new study by the U.S. Chamber of Commerce — the subject of a Wall Street Journal (WSJ) exclusive report Tuesday (April 11) — finds increasing concern among corporations on things like regulations, policy shifts and tax changes.
The study, which analyzed annual reports of publicly traded firms in the S&P 500 index, found that companies used terms related to possible risks from government action roughly 325,000 times in their annual reports for 2021, up 27% from 2011.
“This report confirms what we have been hearing from our member companies about the growing threat of government overreach and the risk it poses to their businesses,” Neil Bradley, the chamber’s executive vice president, said in the WSJ report.
The chamber said the increase in government risks was due to repeated swings in party control, a more partisan approach to creating policy, and willingness among both Democrats and Republicans to enact policy changes via regulation and not legislation.
The study found that healthcare companies and public utilities — both highly-regulated industries — recorded the largest uptick in government threats to profits.
According to the WSJ, the bulk of the policy risk came from the Environmental Protection Agency (EPA), Federal Trade Commission (FTC), Securities and Exchange Commission (SEC) and Justice Department. Risks associated with the FTC climbed 62% between 2011 and 2021.
The findings come as government agencies and legislators are taking a closer look at the cryptocurrency and banking industries following high-profile collapses in both fields.
Last week, the Public Company Accounting Oversight Board (PCAOB) — a regulator overseen by the SEC — said it was readying an update to more than 30 standards on its books which have remained largely unchanged over the last 20 years.
“Much has happened since then. A global banking crisis, a pandemic, another banking crisis, vast advances in technology — the list goes on,” PYMNTS wrote.
The latest Chamber of Commerce report follows one from last month calling on the government to regulate artificial intelligence (AI).
Imagining a world in which “virtually every” business and government agency will use the technology, the chamber said policymakers need to develop rules to make sure AI is deployed responsibly and ethically.
“A failure to regulate AI will harm the economy, potentially diminish individual rights, and constrain the development and introduction of beneficial technologies,” the report said.
The chamber acknowledged the promise of AI, saying the technology “offers great hope for increasing economic opportunity, boosting incomes, speeding life science research at reduced costs, and simplifying the lives of consumers.”