July 09, 2005
Michael Oxley: SOX is "excessive"
Posted by Gordon Smith

What is going on in London? First it was Leo Strine telling Congress to "stay in [their] lane," and now Michael Oxley is admitting that SOX is "excessive." The problem? "If I had another crack at it, I would have provided a bit more flexibility for small- and medium-sized companies." Despite this concession, Oxley held out no hope for change:  "Congress will not re-visit this issue. The SEC reform [on smaller companies] is not going to happen either." (Help me out here ... if the statute is excessive, why not change it?)

Oxley also defended the statute as a whole,

After WorldCom happened it was difficult to legislate responsibly in that type of hot-house atmosphere. But I am proud of the bill. Compliance [with it] is an investment in the strength of the US capital markets.

Finally, Oxley responded to Strine: "The idea that we could leave corporate governance reform to 50 individual states is rather quaint. Investors were looking for a national response to a national problem."

The implicit assumption here is that Enron and WorldCom were corporate governance problems that resulted from a regulatory deficit. This is always the political assumption in the wake of scandal. There is a felt need to do something, which usually translates into doing something fast and ultimately into doing something we will later regret. It seems to me that the biggest change post-Enron is that directors, lawyers, regulators -- and, on a good day, accountants -- are taking corporate governance more seriously. That is a good thing, but it is far from clear that we needed SOX to get there.

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