Time to Remove Our SOX
IN A MOVE INTENDED to ensure the future competitiveness of U.S. financial markets, a newly formed commission will recommend changes [...]
September 1 2006 by Editiorial
IN A MOVE INTENDED to ensure the future competitiveness of
As we have argued several times in this space, in its zeal to respond to legitimate concerns in the wake of corporate scandals, Congress created a remedy that has proved almost as lethal as the disease it purports to cure.
The total cost of compliance with Sarbanes-Oxley has been pegged at about $4 million to $8 million for the average publicly listed company. Keep in mind that in 2004 GE reported spending $30 million on the internal control requirements (section 404) of Sarbanes Oxley alone.
When business leaders do not stand up and take action to reform the “reform,”
Instead of compulsory compliance with Section 404, the most costly element of SOX, why not make it voluntary on condition that companies would be compelled to disclose the degree to which they comply? In this way investors would judge for themselves whether a company’s adherence to the rules justifies a market premium or a penalty. For years the quality movement in business has generated voluntary initiatives where firms have decided that in order to be competitive it was worth the time and treasure to meet the standard. Why not reinvent 404 along the lines of a voluntary standard such as ISO/IEC 1701:2006, where hundreds of thousands of organizations worldwide agree on a management system certification? Because an ISO approach is international, there’s no
Funny how no one complains about competing on quality, so why not compete on management certification?