When they passed the Sarbanes-Oxley Act to stop the Enron debacle from ever happening again they estimated that it would cost about $1.2 billion a year for corporations to fill in the forms to comply with the new law.
Actual outcome? “Recent estimates from the American Electronic Association, for example, show that U.S. companies are spending $35 billion annually” to comply with the law, according to Mallory Factor in OpinionJournal.com.
Guess who is outraged by this dreadful burden on public corporations? Why the long time friend of private enterprise House Minority Leader and Democrat Nancy Pelosi.
Ms. Pelosi acknowledges specifically the need to "ensure Sarbanes-Oxley requirements are not overly burdensome," and endorses reform. Meanwhile, the scourge of Wall Street, New York Attorney General Eliot Spitzer, is criticizing Sarbanes-Oxley's "unbelievable burden on small companies" and its possible role in "preventing some initial public offerings."
Factor credits Pelosi with being “quicker to recognize what many traditional champions of free enterprise have been slow to see: the law's disastrous consequences for our nation's ability to compete.”
Actually, I doubt that. I’d guess that up to now the “traditional champions of free enterprise” have been afraid to talk because they expected to be mau-maued by liberals, Democrats, and the TV news.
But now that the Democrats have come out for reform, that’s great! Let’s go for it. Let’s have a bill out by Memorial Day and on the president’s desk by the Fourth of July.
And could we try to learn a lesson from this? It was already illegal to defraud investors before Sarbanes-Oxley and its onerous reporting requirements. The problem was that people that saw illegal things going on didn’t have the courage to do something about it. And accounting firms, now the beneficiaries of Sarbanes-Oxley, were working both sides of the street, doing consulting for the firms they were supposed to be auditing.
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