Gil Roth04.02.07
Last week, I was talking with a friend of mine from Canada when I offhandedly mentioned my anger about the pseudoephedrine controls that have been imposed in the U.S. (Yes, that sort of subject comes up in my conversations.) He hadn't heard about the laws, which have moved standard decongestants from drug store shelves to behind-the-counter status and replaced them with phenylephrine formulations that aren't actually effective as decongestants. "Why the heck did they do that?" he asked.
"'Think of the children!'" I replied. He looked at me puzzledly. I told him, "In the U.S., any time a legislator or interest group implores us to 'think of the children,' a terrible law is going to get passed. The only question is whether the law will be worse or better than one passed in the face of an immediate crisis." (Yes, I really do talk like this sometimes.)
The Combat Methamphetamine Epidemic Act of 2005 that restricted our decongestant choice actually has the distinction of being passed because of "the children" and as part of the renewal of the USA PATRIOT act, a pretty clear example of one of those crisis-driven laws that should have been debated and limited, not approved 98 to one by the Senate.
Now, I could go on about how destructive the USA PATRIOT Act has been on Americans' liberties - look up My National Security Letter Gag Order, an anonymous editorial in the Washington Post last month, for an idea of what I mean - and how it still managed to get 89 yea votes in Senate for its 2006 renewal. But I'd rather focus on another recent piece of legislation that's near and dear to the hearts of some of my readers: Sarbanes-Oxley.
Passed in July 2002 as a response to the (fraud-based) collapses of Enron, WorldCom, Global Crossing, Adelphia and other companies - as though those collapses and subsequent prison terms under previous laws weren't penalty enough - Congress passed the Sarbanes-Oxley (SOX) Act to "clean up public companies."
The act created the Public Company Accounting Oversight Board, which is charged with overseeing, regulating, inspecting, and disciplining accounting firms that audit public companies. SOX also added criminal penalties for executives who sign off on fraudulent or incorrect public reports. It was a sweeping act, and received a total of three nay votes in both houses of Congress. (I think I've added a corollary: Any law that passes with more than 95% of the votes is probably incredibly flawed.)
Within our industry, executives at smaller publicly held companies have griped to me about the onerous burdens of SOX. Several larger firms have gone private, or sold off their businesses to private equity firms. (And I'm sure it doesn't impact their auditing process at all, but the lateness of major drug companies' annual reports wreaks havoc on my work schedule for our July/August Top Companies issue.)
Some studies - I don't consider them definitive - contend that the regulatory burden of SOX has demolished the market for new public offerings in the U.S., with many companies heading overseas to get publicly listed. There's been talk of scaling back some of its provisions, but I don't think anyone believes that a government agency will relinquish power once it attains it.
Still, its proponents argue, SOX is worth it if it prevents another Enron.
The problem is, one half of Sarbanes-Oxley doesn't think that's the case.
Recently retired Rep. Michael Oxley (R-OH) spoke at an accounting event in Paris last month and, when asked if he would've written the SOX Act differently with 20/20 hindsight, he replied, "Absolutely. Frankly, I would have written it differently, and [Sen. Sarbanes] would have written it differently. But it was not normal times . . . Everybody felt like Rome was burning. People felt like they were getting cheated. It was unlike anything I had ever seen in Congress in 25 years in terms of the heat from the body politic. And all the members were feeling it."
So, despite his misgivings about some of the act, Rep. Oxley sponsored its passage in the House. That's the world's greatest deliberative body for you.
After his retirement this year, naturally, he's seen the error of his ways. He did this just in time to take a vice-chairman position at NASDAQ, where his responsibilities will include . . . meeting with CEOs to discuss SOX compliance issues!
At that same dinner in Paris, Mr. Oxley commented, "About every 20-25 years we get some kind of business scandal. So 20 years from now we could be talking about a whole different kind of scam or scandal - but no one could predict what it is."
Why, there oughtta be a law!
--Gil Roth
"'Think of the children!'" I replied. He looked at me puzzledly. I told him, "In the U.S., any time a legislator or interest group implores us to 'think of the children,' a terrible law is going to get passed. The only question is whether the law will be worse or better than one passed in the face of an immediate crisis." (Yes, I really do talk like this sometimes.)
The Combat Methamphetamine Epidemic Act of 2005 that restricted our decongestant choice actually has the distinction of being passed because of "the children" and as part of the renewal of the USA PATRIOT act, a pretty clear example of one of those crisis-driven laws that should have been debated and limited, not approved 98 to one by the Senate.
Now, I could go on about how destructive the USA PATRIOT Act has been on Americans' liberties - look up My National Security Letter Gag Order, an anonymous editorial in the Washington Post last month, for an idea of what I mean - and how it still managed to get 89 yea votes in Senate for its 2006 renewal. But I'd rather focus on another recent piece of legislation that's near and dear to the hearts of some of my readers: Sarbanes-Oxley.
Passed in July 2002 as a response to the (fraud-based) collapses of Enron, WorldCom, Global Crossing, Adelphia and other companies - as though those collapses and subsequent prison terms under previous laws weren't penalty enough - Congress passed the Sarbanes-Oxley (SOX) Act to "clean up public companies."
The act created the Public Company Accounting Oversight Board, which is charged with overseeing, regulating, inspecting, and disciplining accounting firms that audit public companies. SOX also added criminal penalties for executives who sign off on fraudulent or incorrect public reports. It was a sweeping act, and received a total of three nay votes in both houses of Congress. (I think I've added a corollary: Any law that passes with more than 95% of the votes is probably incredibly flawed.)
Within our industry, executives at smaller publicly held companies have griped to me about the onerous burdens of SOX. Several larger firms have gone private, or sold off their businesses to private equity firms. (And I'm sure it doesn't impact their auditing process at all, but the lateness of major drug companies' annual reports wreaks havoc on my work schedule for our July/August Top Companies issue.)
Some studies - I don't consider them definitive - contend that the regulatory burden of SOX has demolished the market for new public offerings in the U.S., with many companies heading overseas to get publicly listed. There's been talk of scaling back some of its provisions, but I don't think anyone believes that a government agency will relinquish power once it attains it.
Still, its proponents argue, SOX is worth it if it prevents another Enron.
The problem is, one half of Sarbanes-Oxley doesn't think that's the case.
Recently retired Rep. Michael Oxley (R-OH) spoke at an accounting event in Paris last month and, when asked if he would've written the SOX Act differently with 20/20 hindsight, he replied, "Absolutely. Frankly, I would have written it differently, and [Sen. Sarbanes] would have written it differently. But it was not normal times . . . Everybody felt like Rome was burning. People felt like they were getting cheated. It was unlike anything I had ever seen in Congress in 25 years in terms of the heat from the body politic. And all the members were feeling it."
So, despite his misgivings about some of the act, Rep. Oxley sponsored its passage in the House. That's the world's greatest deliberative body for you.
After his retirement this year, naturally, he's seen the error of his ways. He did this just in time to take a vice-chairman position at NASDAQ, where his responsibilities will include . . . meeting with CEOs to discuss SOX compliance issues!
At that same dinner in Paris, Mr. Oxley commented, "About every 20-25 years we get some kind of business scandal. So 20 years from now we could be talking about a whole different kind of scam or scandal - but no one could predict what it is."
Why, there oughtta be a law!
--Gil Roth