Not Their Job fr NY Times

Editorial

Not Their Job

Published: October 19, 2011    NY Times

President Obama's Council on Jobs and Competitiveness has some promising job growth ideas, including ways to speed up projects in energy and infrastructure. But the 27-member council — made up mostly of corporate executives, along with a handful of investors, labor leaders and academics — has indulged in outrageous special pleading, with its assault on Sarbanes-Oxley, the antifraud law passed in 2002 in response to Enron, WorldCom and the dot-com bust. 
Along with several sensible proposals, a recently issued report says that "nearly all" council members want Congress to end important accounting and auditing safeguards in Sarbanes-Oxley, claiming they make it unduly difficult for companies to raise money from investors, impeding their ability to grow and hire. 
Watering down Sarbanes-Oxley has long been a goal of corporate America, despitestudies by the Securities and 

Exchange Commission showing that the law has reduced errors and fraud, and that changes to the law have made it easier for companies to comply. 
As for the supposed barriers to investment, history is rife with companies that cooked their books to lure investors and created jobs in the short run, before imploding and causing mass joblessness. Anything-goes markets are great for investors who get out before the jig is up, or who get bailed out when their bets go bad. They are a raw deal for everyone else. 
Specifically, the report calls for compliance with Sarbanes-Oxley to be made voluntary for public companies worth less than $1 billion. That would relieve some 6,000 companies — or 75 percent of all publicly traded companies — from various requirements, including the rule that corporate boards have independent audit committees, that corporate executives attest to the accuracy of the company's financial statements, and that bonuses based on fraudulent statements be subject to clawback. 
The report says that, at a minimum, companies below the billion-dollar threshold should be allowed to opt out of a rule requiring independent auditors to confirm the effectiveness of a firm's antifraud controls. Or, it says, Congress could exempt new companies from Sarbanes-Oxley for five years after they go public. 
It justifies its proposal in part by blaming Sarbanes-Oxley for a drop in initial public offerings among companies "smaller than $50 million." That is absurd. The law's requirement for an independent auditor has never been enforced for companies worth less than $75 million. 
The council has done itself and President Obama a disservice, misusing a public forum to advance proposals that would benefit the few at the expense of the many. 


"Those who stand for nothing fall for anything"

                          Alexander Hamilton

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