Chief Executive (U.S.), September 1, 2006 | Go to article overview


In an online posting from the editor, CE argued that while some of the unintended consequences of Sarbanes-Oxley are indeed troubling for U.S. competitiveness, much of the whinging about the law is misplaced since CEOs at the time could have come forward publicly to affirm that business, on the whole, is an ethical enterprise, and that the law, particularly with respect to Section 404, was fundamentally misconceived. For the full posting and exchange, visit

White-Collar Witch Hunt or Failure of Nerve

Your article hits on a number of points I have been making for some time. Today I started drafting a letter to my Congressmen and the Speaker of the House (I sit on a board with him) to communicate my deep concern over the unbalanced legislation that SOX has proven to be.

I spent nearly 30 years as an auditor and partner with Big Four firm, KPMG LLP. Upon my retirement nearly four years ago, I joined several boards of public and private companies, now serving on three public company boards, as well as those of a number of privately held and not-for-profit companies.

One of the reasons I wrote down as I was considering my retirement from KPMG was the impact of SOX on the accounting profession and the concerns I had about how it would impact my profession. Little did I anticipate how negative an influence the law would be on business, jobs, capital formation, innovation and our economy.

Your article speaks of the IPO market and how this type of activity is so much greater in Europe than in the U.S. You also speak of the costs of SOX implementation and the number of financial restatements that have been occurring. I question the return on investment for the companies and their shareholders and other stakeholders, the types of alleged improvements in systems that may result from becoming compliant with the requirements of SOX and the alleged reduction of risks that should result from SOX compliance.

I think that Congress must look at the costs and benefits that result from compliance with SOX. I fear that the long-term impact on our economy could be significantly negative. Further, I do not feel that risks to stakeholders have been reduced in any measurable way through compliance with this legislation.

There are significant implications to companies frequently restating their financial results, which is a trend that has escalated since SOX enactment. I believe there are reasons for this, but that goes well beyond my time constraints at this time.

I look forward to reading more thoughts like those presented in your article and believe that these are matters that deserve serious consideration.

Dick Reck

Business Strategy Advisors LLC

Hinsdale, IL

Good article, and I certainly agree with most of your analysis. I am a senior executive with over 25 years of experience in both Fortune 25 arenas and small, privately held high technology businesses. The limited corruption I have witnessed in contemporaries has largely been the result of greed and the axiom that power corrupts absolutely, but it has been infrequent. The real crime occurs after discovery in that there has historically been a lack of enforcement that has been allowed to flourish.

This has been largely out of a desire to "protect the shareholder interests" by avoiding the public display of that greed and the lack of governance. The price, however, is most often paid by those same shareholders and unaware employees who become victims. Now through SOX, many pay that price twice or more. We who are blessed to have the opportunity to lead an organization from the executive suite should focus on how to manage our resources with honest leadership as our guide, not the manipulation of operating results for our own benefit.

Those who cannot run a business within the rules and largely meet the desires of shareholders and employees should not aspire to or retain such positions of accountability. …

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