Attacking Sarbanes-Oxley

The Competitive Enterprise Institute writes:

There have been many estimates of Sarbanes-Oxley’s costs. It has rasied the overall cost of operating as a public company by 130 percent, according to the law firm Foley and Lardner. It has added 30,700 man-hours for each firm, according to the trade group Financial Executives International. Additional time that you have to spend complying with accounting is time that you can’t spend on developing your product. A Korn-Ferry survey found on average $5 million in costs devoted to this for Fortune 1000 firms. But those surveys, which I wrote about in National Review, have all been superseded by an academic economic study by Ivy Zhang of the Graduate School of Business at the University of Rochester. She found that there has been a $1.4 trillion market loss attributable to Sarbanes-Oxley.

First of all, the $1.4 trillion decline in stock valuations was not entirely due to the passage of Sarbanes-Oxley. But if a company’s operating costs were increased by a factor of 1.3, it would surely have massive losses unless its operating profit margin had been around 60% before the passage of Sarbanes-Oxley.

The author is John Berlau and his attack on Sarbanes-Oxley was picked up by Iain Murray who thinks extending Sarbanes-Oxley globally will somehow hurt our war on terrorism.

Mallory Factor continues the spin and recommends:

Why not make Sarbanes-Oxley compliance optional for public companies?

This sounds like George W. Bush’s proposal regarding the treatment of expenses related to employee stock options – let companies have the option whether to follow FASB 123 or not. Had enough insanity? Me too, se let’s check out the latest from the sensible Daniel Gross:

The U.S. Chamber of Commerce says that if the accounting industry isn’t given special protection when it commits negligence and gets in bed with crooked clients, we could all be doomed.

Ah yes, we should all return to the wild, wild west days when the robber barrons received government protection and the little fellow got the shaft!