Hong Kong Stock Exchange

Jamie Dimon, Alibaba, and our crumbling regulatory standards

October 7, 2013: 12:14 PM ET

The JP Morgan CEO and the Chinese e-commerce giant are being portrayed as victims of harsh regulatory regimes. But nothing could be further from the truth.

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FORTUNE -- Mr. Dimon went to Washington, and Chinese e-commerce firm Alibaba is looking to make it big in New York with an IPO. In light of the government shutdown and worldwide unrest, a reasonable reaction might be, "So what?" But if we had time-travelled directly to now from a decade ago, we'd probably have a more informed response to both incidents: alarm -- followed by demands to our U.S. regulators and enforcers.

J.P. Morgan (JPM) CEO Jamie Dimon's visit to U.S. Attorney General Eric Holder warrants a close look. Bloomberg's Caroline Baum likened Dimon to "hero" Hank Rearden from Ayn Rand's novel Atlas Shrugged, arguing that in facing down his judges, he is wrestling with the oppressive rule of the state.

The New York Times had a slightly different, if not similarly disturbing, take. They called for readers to submit captions of the photo of Dimon's visit to Holder. Wow, what fun.

But let's consider this: Wouldn't every company CEO like the access available to Dimon -- to visit the U.S. Attorney General personally and negotiate their way out of criminal charges?

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The response to similar actions was markedly different 11 years ago. I remember, and maybe you do too, when Harvey Pitt resigned as SEC chief amid a series of uproars that concerned his coziness to accounting firms.

One of Pitt's pileup of controversies involved a meeting with Gene O' Kelly, then CEO of KPMG, when that firm was under investigation related to the Xerox accounting scandal. (Full disclosure: Gene O, as he was called, and I co-authored an article together for American Banker in 1998.)

Unlike the responses that we are witnessing toward the Dimon-Holder conclave, the reaction to the O'Kelly-Pitt sit-down was fiercely protective of the integrity of the enforcement process. With the past as our guide, we need to ask ourselves, why is there so little controversy over the J.P. Morgan CEO's tête-à-tête with the U.S. A.G., the same attorney general who hasn't prosecuted any financial chiefs post-crisis.

Another situation we should be watching is the Alibaba IPO, which is expected to take place within the next year. The Hong Kong Stock Exchange refused to list the Chinese e-commerce company for governance concerns. So Alibaba is headed to the good ole' U.S. of A.

But wait a minute. When and how did the U.S. become a place where any company could list? What happened to the New York Stock Exchange (NYSE) being the premier worldwide exchange, which only listed the crème de la crème?

Where we are now isn't exactly a fluke. NYSE CEO Duncan Niederauer promoted this path when he proclaimed loudly, even post-crisis, that high standards hurt the NYSE's ability to attract listings. So today, there's no badge of honor to be on the NYSE like there once was. If a company like Alibaba can't list where they'd really like to, they can come here. And by allowing the NYSE to operate as they have, U.S. regulators have contributed to lowering governance standards internationally.

The Council of Institutional Investors (CII) is not pleased with Niederauer's stance and regulators' laxity. Late last year, CII called on the U.S. exchanges to beef up listing requirements. Listing standards matter because they instill trust in our capital markets by providing some assurance about the quality of the listed companies.

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Clearly, Niederauer 's posture hasn't been a magic bullet for the NYSE, anyway. The less well-known Intercontinental Exchange (ICE) is taking over the NYSE as early as this month.

Last week, SEC Chief Mary Jo White raised the conundrum of the dual function of exchanges as regulatory agents "even as they operate as for-profit entities." But it's unclear whether she will take aim at comparatively weak U.S. listing requirements that have been leapfrogged by jurisdictions like Hong Kong.

The U.S. economy depends on our commitment to excel. Over the long term, we have attracted customers and capital to this country due to the superiority of our products and our markets. Lower aspirations provide no pathway to good paying jobs.

By weakening U.S. standards, we become, at best, the second-choice provider. After all, we were not Alibaba's first pick.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board education and advisory firm.

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