Newt Gingrich: Repeal Sarbanes-Oxley

Newt Gingrich: Repeal Sarbanes-Oxley

Excerpts:

It has been six years since Congress passed the Sarbanes-Oxley Act after the devastating accounting irregularities of Enron and WorldCom. While the intent of the law was to prevent corporate fraud, there is growing evidence that it has done more harm than good, and is undermining the venture-capital industry in Silicon Valley. Now, with signs that our economy is moving toward recession, Congress should take this opportunity to repeal the law.

Rep. Michael G. Oxley, R-Ohio, recently said in an interview with the International Herald Tribune that Sarbanes-Oxley was passed in haste. "Frankly, I would have written it differently. ... Everyone felt like Rome was burning."

Sarbanes-Oxley went too far in regulating corporate governance, resulting in at least three unintended consequences:

1. It was insufficient at preventing insolvencies and accounting shortfalls in companies such as Bear Sterns, Lehman Bros., American International Group (AIG) and Merrill Lynch.
   
2. It initiated a movement among smaller public companies to return to private status or merge.
   
3. It is resulting in a trend where companies choose to go public on foreign, not American, stock exchanges. In 2005, a report by the London Stock Exchange cited that about 38 percent of the international companies surveyed said they had considered issuing securities in the United States. Of those, 90 percent said the onerous demands of the new Sarbanes-Oxley corporate governance law had made London listing more attractive.
   
   

Comment: A fourth consequence, it created non-productive jobs in corporate America (more lawyers, more accountants, more auditors (sorry to my daughter who is a corporate auditor!). It decreased productivity and productivity is the lifeblood of economic progress. I hope Newt Gingrich never runs for the Presidency again, but he is the last great GOP thinkers!