ON SECOND THOUGHT...
September 29, 2006
Former Federal Reserve Bank Chairman Alan Greenspan recently said that the Sarbanes-Oxley corporate governance rules are stifling. Strong words from a man who once supported the law, says Investor's Business Daily (IBD).
While originally meant to prevent public corporation accounting messes such as those at Enron and WorldCom, the law has become increasingly burdensome on companies that must comply and is driving initial public stock offerings (IPOs) away from the New York Stock Exchange. For example, Sarbanes-Oxley:
- Requires small companies to spend an average $3 million a year and big companies an average $8 million to comply with its rules.
- It is responsible for a $1.5 trillion reduction in value in the U.S. stock market, according to an American Enterprise Institute study.
- It creates conditions so demanding that only one of the top 10 overseas IPOs was held in the United States last year.
- Prompts European companies to withdraw from U.S. exchanges because of the heavy financial burden of compliance.
According to Greenspan, though Sarbanes-Oxley must be changed, nothing will be done until the sponsoring Congressmen, Sen. Paul Sarbanes of Maryland and Rep. Mike Oxley of Ohio, retire.
But retirement shouldn't interfere with doing what's right and repealing a deeply flawed bill in its entirety, says IBD. And if lawmakers are afraid to say goodbye to the bill, Sarbanes and Oxley could spare them the angst by leading the campaign to eliminate their business-crippling creation.
Source: Editorial, "On Second Thought…," Investor's Business Daily, September 29, 2006.
Browse more articles on Economic Issues