SarBox - Holding the Line

In the late 1990, corporate corruption inflated the telecom bubble, leading to its eventual crash in the summer of 2002. In economic terms this corruption became an externality (costs borne by 3rd parties) and resulted in an oversupply of the product. In this case, too much fiber (Enron, Tyco, Worldcom, etc.), too many ISPs, too many dot.coms. The eventual crash resulted in some $7 trillion in inflated values melting away and even the demise of one of the "Big Eight" accounting firms, Artur Andersen. In the wake of the ongoing crises, the SEC, Congress, and the Bush Administration came up with legislation that make CEOs accountable for financial statements. The Sarbanes-Oxley Act of 2002 took effect in July of that year and became a boom for the IT industry suffering from the market collapse and continuous outsourcing. Not to mention the accounting industry. But there has been a lot of complaints about the cost and that global firms are increasingly listing on non-US share markets.

I say the US has to hold the line and provide a oversight model for the rest of the world. There was a lot of opposition to the SEC when it was created but can you imagine not having the transparency that quarterly filings provide? As we move towards the end of pensions and the rise of the 401(k)s, do you want your retirement savings in companies where the CEOs would not verify the accounting? Most of the costs have already been registered and IT-financial controls are largely automated. Transparency is a good thing.