Necessary Roughness

Representative Mike Oxley (R-Ohio) is chairing a hearing of the House Financial Service Committee on the effectiveness of the Sarbanes-Oxley legislation enacted in 2003. Human Events has some data in an opinion piece:

In its four years, “Sarbox” has damaged the American economy as badly as a group of unsupervised four year-olds would damage a playroom. U.S. companies have spent tens of billions of dollars in compliance costs (about $35 billion), far more than the SEC’s 2003 estimate of $1.2 billion, with small companies hit especially hard.

Companies, both American and foreign, have decided that the costs and uncertain enforcement of SOX are too high a price to pay for the benefit of access to American capital markets. In 2005, 23 of 24 firms that raised over $1 billion in capital didn’t register their securities offerings in U.S. markets, according to the New York Stock Exchange. The London Stock Exchange listed 129 companies last year—while only six chose New York and 14 the NASDAQ. And yet our economy is booming in comparison to Europe and Japan. Something is wrong, and that something is Sarbanes-Oxley.

Even our software has been affected indirectly by Sarbanes-Oxley. One of the requirements of SOX is that the customer signs the final bill at the time of service. In the oilfield, the final bill is reviewed by the office first before the customer is invoiced because each customer can have their own contracts. The customer’s representative on location may not know their own pricing contract. Our guys in the field are responsible for good job performance while maintaining a high level of safety. SOX in its original incarnation also makes the field guys responsible for final correct pricing. It’s a lot to ask, and we’ve incurred costs in our software development to help the field accomplish this task.

Check out the whole article; it’s a must read.