Sarbanes-Oxley Second Thoughts

By March 8, 2007Briefly Legal, Economy

From Mike Oxley, at least. The International Herald-Tribune profiles the former Ohio congressman and his doubts about the reactive legislation, Sarbanes-Oxley, that has burdened U.S. businesses with rules, procedures and penalties, all with little noticeable benefit to stockholders.

Presiding over a recent dinner in Paris for more than 200 accountants, Oxley — the former Republican congressman from Ohio and co-author of the Sarbanes-Oxley corporate governance law — was asked during the question period whether he realized he had helped create one of the most crushing financial burdens ever imposed on business.

Was Oxley aware, his questioners asked, that the law that he and Senator Paul Sarbanes, a Maryland Democrat, rushed onto the books five years ago after the collapse of Enron and WorldCom had contributed to a sharp decline in listings on U.S. stock exchanges? And, knowing what he knows now about the cost and effects of the law, would Oxley — who retired in January after 25 years in Congress — have done it any differently?

“Absolutely,” Oxley answered. “Frankly, I would have written it differently, and he would have written it differently,” he added, referring to Sarbanes. “But it was not normal times.”

And issues keep popping up.

Researchers are predicting a six-fold increase in the amount of digital information created over the next four years, which could have serious implications for IT departments.

According to a report released this week, the amount of data created by e-mail, digital cameras, keystrokes and so on is set to increase from 161 exabytes in 2006 to 988 exabytes in 2010. (An exabyte is a billion gigabytes.)

OK, a challenge, but the connection to corporate governance and Sarbanes-Oxley overkill?

Around 20 percent of the 161 exabytes of data created last year is subject to compliance rules such as Sarbanes-Oxley, Basel II and other government legislation, according to IDC. The researchers claim that companies will have to improve their IT infrastructure to make sure that their compliance strategies can cope with the rise in data over the next four years.

(Hat tip: Professor

UPDATE (11:30 a.m., March 9): Oxley joins