March 25, 2006
Senator Sarbanes Defends SOX Legislation
Senator Paul Sarbanes is actively defending the Sarbanes-Oxley Act of 2002 from criticisms that are gaining momentum in the U.S.
The SOX legislation's co-author defended the legislation in a speech to the Consumer Federation of America on March 23rd. Early on, the Democratic senator from Maryland quoted from an editorial in the Wall Street Journal shortly after Enron imploded:
"The scope and scale of the corporate transgressions of the late 1990s now coming to light exceed anything the U.S. has witnessed since the years preceding the Great Depression."
And then Sarbanes went on to say, "The roots of the problem lay not with the legendary 'few bad apples' but rather with systemic and structural defects that required a statutory remedy."
In this blogger's opinion the sad truth is that a few bad apples (Enron, etc) have revealed that upon further inspection many apples in the barrel have internal control over financial reporting problems. Couple these problems with overly aggressive auditor attestation and you have a very expensive proposition to fix, but in the end investors will be better off. The rules will be tweaked to address some of the intitial implementation/cost concerns and life will move on. In the meantime, if some new IPO candidates move to offshore markets primarily because of lower compliance standards, then let them. Investors are better off avoiding these companies.
The SOX legislation's co-author defended the legislation in a speech to the Consumer Federation of America on March 23rd. Early on, the Democratic senator from Maryland quoted from an editorial in the Wall Street Journal shortly after Enron imploded:
"The scope and scale of the corporate transgressions of the late 1990s now coming to light exceed anything the U.S. has witnessed since the years preceding the Great Depression."
And then Sarbanes went on to say, "The roots of the problem lay not with the legendary 'few bad apples' but rather with systemic and structural defects that required a statutory remedy."
In this blogger's opinion the sad truth is that a few bad apples (Enron, etc) have revealed that upon further inspection many apples in the barrel have internal control over financial reporting problems. Couple these problems with overly aggressive auditor attestation and you have a very expensive proposition to fix, but in the end investors will be better off. The rules will be tweaked to address some of the intitial implementation/cost concerns and life will move on. In the meantime, if some new IPO candidates move to offshore markets primarily because of lower compliance standards, then let them. Investors are better off avoiding these companies.
