Sarbanes-Oxley Considered Dangerous

Michael Oxley is now saying that the Sarbanes-Oxley legislation was a mistake, and that Paul Sarbanes agrees. I could have told you this years ago. Oh wait, I did tell you this years ago.

The basic idea of the story is that Sarbanes-Oxley legislation imposes a crushing financial burden on all publicly-owned companies. Which is true. I was one of the thousands of people employed to deal with it. (Not that I’m complaining.)

SOX legislation, specifically section 404, says that corporate reporting needs to be validated by internal and external auditors. This is good in many ways, and I’ve personally seen a lot of good practices instituted, but you have to remember something. Auditing is just another business. The auditors are there to make money. They’re going to turn your company upside-down to find tiny problems that aren’t really against the spirit of honest capitalism. That’s why it’s a crushing financial burden.

I said it then, and I’ll say it again now – there’s no need to overhaul corporations on account of a few bad eggs. It’s really about common sense. You don’t make up financial numbers, and you don’t lie to the public. Is that really so hard?