Assault on Capitalism?
May 29, 2003
The new laws designed to legislate honesty on Wall Street have been creating problems of their own. Experts say the new rules will make life tougher for all 15,000 publicly-traded firms in the United States.
The questions center on the Sarbanes-Oxley Act of 2002, which forces companies to wade through 60 pages of new laws and hundreds of pages of regulatory interpretations.
- Many will have to underwrite more expensive audits and revamp financial controls, even if they believe the costs far outweigh any benefit.
- Their foreign operations must comply with the same standards, even if doing so conflicts with local laws.
- Another provision requires companies to give even the lowliest janitor on the other side of the globe a way to blow the whistle on financial wrongdoing, anytime day or night.
The costs of this crackdown could be staggering: as much as $15 billion this year and $13 billion a year thereafter by one well-grounded estimate from financial consultant Johnsson Group. You could say that Wall Street brought this virulent political overreaction on itself. A record 330 public companies restated their financials last year.
Critics warn that Sarbanes-Oxley criminalizes risk-taking, which could spell the end of capitalism as we know it.
Source: Neil Weinberg, "Criminalizing Capitalism," Forbes, May 12, 2003.
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