Time to Remove Our SOX
IN A MOVE INTENDED to ensure the future competitiveness of U.S. financial markets, a newly formed commission will recommend changes to the Sarbanes-Oxley Act and other regulatory mandates. "The Committee on Capital Markets Regulation," will be co-chaired by former White House economic advisor Glenn Hubbard and Goldman Sachs president John Thornton. It will submit its recommendations at the end of November.
As we have argued several times in this space, in its zeal to respond to legitimate concerns in the wake of corporate scandals, Congress created a remedy that has proved almost as lethal as the disease it purports to cure.
The total cost of compliance with Sarbanes-Oxley has been pegged at about $4 million to $8 million for the average publicly listed company. Keep in mind that in 2004 GE reported spending $30 million on the internal control requirements (section 404) of Sarbanes Oxley alone.
When business leaders do not stand up and take action to reform the "reform," U.S. capitalism faces a greater calamity than corralling a few crooks. Twenty-four of the last 25 major IPOs took place in markets outside the U.S. Many of these share offerings expressly prohibit American shareholders from participating in capital-raising for fear that companies will be drawn into America's litigation vortex or the extra-territorial reach of the sec. …