Strengthening Constitutional Self-Government

No Left Turns

And We Needed this Law Why?

Bernie Ebbers gets 25 years in the slammer for his role in the Worldcom fraud, merely the latest in a string of mostly successful convictions of corporate wrongdoers. (So far only Scruggs has been acquitted.) Watch for all the Enron guys to go down.

All of which suggests that the panic to pass Sarbanes-Oxley was unnecessary, doesn’t it? We’re convicting corporate wrongdoing just fine without it, and I suspect the sentences Ebbers, Koslowski and others are getting is plenty deterrent.

Now, the defense of Sarbanes-Oxley is that it should help prevent corporate fraud, so that we don’t have to prosecute people like Ebbers ever again. But the cost is way too high. The Wall Street Journal reports this morning (available online to subscribers only, alas), that public companies are spending nearly $6 billion a year to comply with Sarbanes-Oxley, but this number is surely the tip of the visible iceberg that is sinking lots of productive capital. The real cost is surely much higher. And for what?

The Journal adds one other significant tidbit that should be of interest to Ohio and elsewhere: Sarbanes-Oxley is leading to more outsourcing. Money graph:

"An increasing number of companies are looking to India’s information-technology outsourcing firms to cut the cost and time needed to comply with the [Sarbanes-Oxley] law, say analysts, consultants, and Indian entrepreneurs."

Discussions - 1 Comment

I am not a WSJ subscriber, so I cannot read the article. A few thoughts:

(1) Corporations seem to do okay in spite of CEO’s inflated salaries of many. I don’t think $6B divided among all publicly traded companies can compare

(2) You say "only" Scrushy got off. Well, if you were affected by the biggest healthcare fraud in history, you probably wouldn’t say that.

(3) You say, "watch for all the Enron guys to go down." The middle-management will, but we will see about the stars.

(4) You could blame outsourcing on Sarbanes-Oxley. You could also blame it one corporate greed/rational self-interest (depending on your politics).

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