Thursday, March 08, 2007
Oops: Oxley recants
The corporate scandals at the end of the Clinton market bubble provoked the "Sarbanes-Oxley" law, a hastily contrived and unanimously enacted statute that has crushed creativity within American public companies, turned directors into procedure-obsessed bureaucrats who now spend less time actually reviewing substantive business issues than ever before, and imposed such massive costs and bureaucratic burdens that many companies have chosen not to go public or to do so in markets outside the United States (my previous posts on the subject are here and here).
Well, in the category of "now you tell me," one of the law's legislative sponsors, Michael Oxley, has now recanted.
Was Oxley aware, his questioners asked, that the law that he and Senator Paul Sarbanes, a Maryland Democrat, rushed onto the books five years ago after the collapse of Enron and WorldCom had contributed to a sharp decline in listings on U.S. stock exchanges? And, knowing what he knows now about the cost and effects of the law, would Oxley — who retired in January after 25 years in Congress — have done it any differently?
"Absolutely," Oxley answered. "Frankly, I would have written it differently, and he would have written it differently," he added, referring to Sarbanes. "But it was not normal times." [. . .]
We -- meaning all beneficiaries of the American economy -- desperately need some sensible reform of the Sarbanes-Oxley law. Ironically, there was never any chance for that when the Republicans controlled the Congress, because the Democrats would have turned it into a campaign issue against them -- "Benedict Arnold CEOs" and such. Only Nixon could go to China, and only Nancy Pelosi can amend Sarbanes-Oxley.
If the reform of Sarbanes-Oxley does gain some momentum, expect strong opposition from public accountants. They have been the huge winners under the law because it has created vast new requirements for their services. As I wrote last year, "[i]f we see a movement to scale-back SarbOx, expect sanctimonious public accountants to lead the charge in opposition. Whether sincere or not in their opinions, they will be defending their own financial interest." So if SarBox reform gains momentum we will all have to gird our loins for some very preachy op-ed articles from accounting professors with close ties to the Big Four. A scary prospect to be sure, but one that should not stay us from our holy mission.
CWCID: Glenn Reynolds.
1 Comments:
By 
D.E. Cloutier, at
Thu Mar 08, 09:45:00 AM:
If you can't outmaneuver a bunch of bookkeepers, you don't deserve to win.
