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let's just say that Sarbanes-Oxley is one of the worst examples you could have come up with to support your position.

natedogg

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Parts of Sarbanes-Oxley
Public company oversight board-
• Register all public accounting firms that provide audits for public companies.
• Establish standards relating to the preparation of audit reports for public companies.
• Conduct inspections (reviews) of accounting firms.
• Conduct investigations and disciplinary proceedings and impose appropriate sanctions on pubic accounting firms whose performance is inadequate.
• Enforce compliance with the Sarbanes-Oxley Act

Constraints on Auditors – Designed to ensure that auditors remain independent.
-Accounting firms are prohibited from providing non-accounting services to clients.
- Auditors rotated every five years
- Reports to company’s audit committee and not the management

Constraints on Management – designed to ensure validity of financial statements.
-Management makes statements asserting the accuracy of data.
- Public companies must develop and enforce an officer code of ethics.
- Loans to company officers are prohibited.
-Support of an audit committee. Not part of management & reports to board of directors.

One assumption that the government must reinforce to promote trust is that of ethical action on the part of the participants in the market. Ethics is a very confusing subject, however, and means many different things to many different people. While certain universal ethical principles exist that transcend culture and religion, many people act on cultural or religious premises believing they are ethical. The government cannot mandate a particular code of ethics to market participants. The best approach that can be taken is to set laws such as those the SEC enforces that are supposed measures of ethical action. In the case of Sarbanes-Oxley, the law is in place to foster a situation in publicly traded firms where ethical action on the part of all parties is the best course of action. Of course, the old way of doing things where the board, accounting firms, bankers, stockholders, etc got together assumed the best course of all parties was ethical until Enron happened.

Through the establishment of laws, the government promotes the perception of ethical behavior through the assumption that to obey the law is to act ethically. The actions taken by many corporations involved in scandals in 2001-2002 were not technically illegal, however. Although unethical in context, certain actions can be considered legal. But the shortcomings of law in this regard are unimportant in the face of establishing trust in the market.

Arguably, the economy, businesses, consumers and government are better off today after the passage of Sarbanes-Oxley. The market has recovered from a 10 year low in the early 2000’s to record levels. As of today, five years after Sarbanes-Oxley, the economy is booming, unemployment is at a record low, and tax revenues are surging in decreasing the deficit. The approach of the government to the ebb and flow of trust in the capital markets is clearly effective when action is taken.

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To be fair a lot of companies are being taken private precisely because they would prefer not to have the scrutiny and possible penalties that Sarbanes-Oxley brings about. Companies claim that Sarbanes-Oxley has added expenses to operations and in reality the prospect of CEOs going to jail for signing off on bogus 10-Qs and 10-Ks has a lot to do with that. Corporate profits seem to be very high to me so the carping that companies do about Sarbanes-Oxley is probably disingenuous in some cases. For smaller market cap companies I'm willing to believe that Sarbanes-Oxley is an encumberance that makes it harder for them to compete.