Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi Consulting Corporation Will the Democrats Champion XBRL?
Written by Bob Schneider Posted on December 6, 2008
Like any other constituency, it’s only natural for the XBRL community to wonder how its mission will be viewed by the incoming Administration and Congress. With that in mind, I have been Googling XBRL with various members of the Obama team, Democratic politicians, and left-of-center think tanks, trying to find names in the new political realm that have expressed an opinion on interactive data.
Thus far the results have been underwhelming. One notable exception is Robert Pozen, the head of the eponymous Pozen Committee and an important Democratic contributor, who has been mentioned as a possible Chairman of the SEC. As demonstrated by his Committee’s work, the discussion paper he drafted, and the interviews he’s given, Mr. Pozen is a solid proponent of XBRL (although perhaps not as aggressive as some would like).
Besides Mr. Pozen, however, I have found few Democratic names. I did note one analyst at Brookings who, in Congressional testimony back in 2002, said some nice things about XBRL, but that’s been about it.
I didn’t expect to find much. Viewed from a political perspective, the enthusiasm I’ve seen for XBRL has come from the Right (if I can use that very inadequate shorthand). Prominent names include, of course, SEC Chairman Chris Cox; Newt Gingrich; and Peter Wallison at the AEI.
Some of the imbalance simply reflects Republican rule for the past eight years, when XBRL has come of age. An SEC Chairman appointed by a President Gore or Kerry might well have pursued a similar course for interactive data as Mr. Cox, with or without the same high level of enthusiasm.
There are indications of XBRL support among the SEC’s Democratic commissioners. (In an effort to maintain nonpartisanship, no more than three of the SEC’s five Commissioners can belong to the same political party.) When the proposed rule on interactive data was passed 3-0 on May 14, the Democratic seats were vacant. In 2007, however, former (Democratic) Commissioner Roel Campos — in voting to disclose mutual fund risk/return data in XBRL format — expressed his support for interactive data in this Reuters article. And new (Democratic) Commissioner Elisse Walter made positive, if slight, reference to XBRL in this speech given in 2007 when she was Senior Executive VP at FINRA.
Still, that’s small beer compared with the enthusiasm shown by (Republican) Commissioner Kathleen Casey in her keynote address at the 15th XBRL conference, or the work done on XBRL by new (Republican) Commissioner Troy Paredes.
I do think interactive data might be more appealing to Republicans in one respect: its ability to help retail investors do their own research. With stock prices savaged and Democrats cool to privatizing Social Security, that doesn’t seem like a theme that would resonate within the Obama Administration.
Empowering individual investors, however, is just one of the positives of XBRL adoption. An advantage that Messrs. Cox, Gingrich, and Wallison have continually emphasized is that implementing XBRL will help keep America’s capital markets competitive with overseas rivals. At a time when the financial services sector has been battered, maintaining its international competitiveness will be important to the powerful, largely Democratic New York delegation.
Moreover, there have been implementations of XBRL that should have special appeal to a left-of-center government, notably sustainability reporting, executive compensation, and microfinance (which, you’ll recall, was an area in which Mr. Obama’s mother was very active).
Furthermore, many of the same institutional needs of government are in place regardless whether Democrats or Republicans are in power. Specifically, if an important motivation for the SEC to pursue XBRL has been the need for its own analysts to review company financial reports more cheaply and easily, that will be just as true in an Obama Administration. And the GAO report the other day that the Treasury Department hasn’t developed sufficient controls to monitor the $700 billion bank bailout highlights the challenges faced by government of whatever party in trying to come to grip with the current financial crisis.
Just on the level of simple-minded political caricature, if we think of GOPers mindlessly screaming USA! USA! USA! as the Dems happily relinquish our national sovereignty to the U.N., then certainly a one-world reporting regime of XBRL/IFRS seems more suitable for the donkey than the elephant.
More usefully, it would be exciting if the new Administration saw XBRL as a means of changing the way government operates (pace the Dutch Taxonomy Project) and normalizing Federal government data. XBRL isn’t, of course, the entire answer. But the ability for agencies to communicate easily with one another using the XBRL data format would help enormously in improving the way government works.
December 8th, 2008 at 2:11 pm
I believe the lack of apparent Democratic Party enthusiasm for XBRL mentioned in Bob Schneider’s article is more a function of their lack of focus on, and education about the value of XBRL. Here are some additional points that might help entice Democratic Party support for XBRL:
1. Need for increased transparency in the global financial markets – Every pundit, from every political side, is championing the need for greater transparency in the US and world capital markets, to restore confidence in our markets and reduce the risk of repeating the economic crisis we’re presently experiencing. The new administration has also been advocating this, in addition to the need for increased financial regulation. Having them join the XBRL bandwagon should take little effort, if they understand how XBRL fits into this transparency equation. I believe it’s our job (the XBRL community) to help them understand this XBRL value proposition.
2. In line with your comment, “Empowering individual investors, however, is just one of the positives of XBRL adoption” – It might be necessary to put this concept into “Democratic Party speak.” Here’s my stab at spinning XBRL into one of their campaign themes – “Providing financial disclosure in XBRL format will help level the investing playing field and democratize the investing process” – The Democrats should be taking the lead in promoting XBRL, as its adoption will offer every investor access to richer and easier to use information, at their fingertips, exactly as they wish to see it. Access to this type of interactive data today is generally limited to the elite, professional investors who have the money to pay for externally created analytical reports, or build sophisticated tools to process it.
OR, in FDR Speak – XBRL gives the “forgotten man” access to the same type of interactive data available today only to the “moneychangers.”
In all seriousness, with all the challenging financial issues confronting our country today, having a bi-partisan bandwagon form to lead the SEC disclosure system into the 21st century should truly be a “no brainer!” As indicated in my opening statement, I believe it comes down to the need to educate our political leaders – be they Democrat or Republican – of the true advantages we’ll realize by adopting the SEC’s XBRL initiatives.
The SEC certainly has monumental work in front of them to help restore the world’s confidence in our country’s capital markets. One such action that can help, the proposal to mandate companies prepare financial information in XBRL format, is ready to launch.
Maybe FDR’s words are appropriate here as well. “Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now!” Adopting the XBRL mandate now, and getting bi-partisan support behind the SEC’s IDEA and 21st Century Disclosure projects will certainly be a step in the right direction.