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CLOSE THE REVOLVING DOOR

Originally Published in The Goldhaber Warnings Report, August 2017

By: Gerald M. Goldhaber, Ph.D.
Tel: 212-379-6661
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Regulatory agencies (e.g., FDA, OSHA, CPSC, NHTSA, etc.) exist to serve and protect the public from bad actors in the corporate or industrial world whose decisions and actions may lead to products or services that could potentially harm or kill workers and consumers. It would seem obvious, therefore, that the leaders of these agencies would be strong, neutral and objective regulators without close ties to the very industries they must regulate. Under such a model, the best interests of the public could be served without concern for the profits of the regulated industries. Unfortunately, as anyone who reads any newspaper knows too well, that model has never been true. In fact, since the creation of virtually every regulatory agency, the leadership of these agencies have either come from or exited to the very industries they were to regulate. A study that my staff and I did last year revealed that an astounding and alarming 67% of all senior staffers in positions of authority with such agencies had come either directly or indirectly from careers in the very industries they were hired to oversee and regulate. Making matters worse, there is nothing in their federal contracts that prevents them from blithely switching back and forth-----no clause to, in effect, prevent them from being enriched through the kinds of "regulations" they impose, or more likely, fail to impose as so-called regulators---when they inevitably return to senior positions in the same industry. We saw this very clearly with the example of Robert Califf as the recent head of the FDA, (profiled in the November, 2016 issue of this newsletter) whose close ties to Big Pharma were so embarrassing that his term only lasted 11 months.

There is actually a very simple strategy that could effectively correct this intolerable yet nonetheless pervasive situation almost immediately. Moreover, it is a solution that is available right now if and when lawmakers ever summon the courage to invoke it. Of course, therein lies the rub. Consumer advocates have long maintained that executives hired into certain key leadership positions among the most essential U.S. regulatory agencies must be required to agree to a clause in their contracts that restricts or prohibits them from working in or profiting from that industry for a specified period of time after they leave the government agency. This is by no means extreme, nor without legal precedent. Big business in the corporate sector routinely requires senior executives to sign employment contracts that contain a "Non-Compete Clause" that legally prevents them, should they decide to leave the firm, from working for other companies or organizations engaged in the same industry.

Not only that, but such contracts also often prevent ex-executives from disclosing trade secrets and other sensitive internal information they may have been privy to while a standing member of the firm. So, think about it: even if they leave the firm under amicable circumstances, like retirement, for example, executives bound by this contractual obligation are not even allowed to discuss their former employer's internal dealings from their retirement homes in the Hamptons or their yachts in Boston Harbor.

In order to effectively reform the regulatory process across all U.S. agencies, many outspoken consumer advocates have called for agency executives to be contractually prohibited from working in the regulated industry for a period of five years after leaving the agency. I believe that's not enough. I believe that the prohibition must be for a full ten years. And I also like the idea of including a restriction against disclosure of the agency's internal information. After all, this could include sensitive information about ongoing investigations into questionable or dubious industry practices, or attempted coverups of known hidden hazards or product flaws, and so on. Why allow former executive regulators, even after they have left the agency, to tip off a company or industry practice under investigation that might in turn result in the company dodging responsibility for injury liability or negligence in court? But the broader and more critical question is this: If non-compete clauses are good enough for American and international business and industry, why should anyone object to their being equally applied to the important "business" of government regulatory oversight?

Please feel free to share this issue of the Goldhaber Warnings Report with any interested friends or colleagues who may wish to subscribe to this newsletter or enroll in any of my NACLE courses on warnings.


Dr. Gerald M. Goldhaber, the President of Goldhaber Research Associates, LLC, is a nationally recognized expert in the fields of Political Polling and Warning Label Research. His clients include Fortune 500 companies, as well as educational and governmental organizations. He has conducted hundreds of surveys, including political polls for candidates running for U.S Congress, Senate, and President. Dr. Goldhaber also served as a consultant to President Reagan's Private Sector Survey for Cost Control.

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