End, Don't Mend, Sarbanes-Oxley
March 26, 2007
Irvine, CA--In response to a request by a group of business lobbyists to amend some portions of the controversial Sarbanes-Oxley accounting law, SEC chairman Christopher Cox has come out in favor of preserving the law as is. Alex Epstein, a junior fellow, at the Ayn Rand Institute, says both sides are wrong. "Sarbanes-Oxley should be neither amended nor preserved. It is a fundamentally corrupt law that should be repealed.
"Why have executives been complaining about the horrors of Sarbanes-Oxley for four-and-a-half years? Not because they are cheats who want to get away with accounting fraud, but because the law treats them as if they are--as guilty until proven innocent. In the name of scaring CEOs straight, Sarbanes-Oxley holds them criminally liable for any 'unfair' accounting by any employee in their company--and gives the government incredible latitude to determine what 'unfair' means.
"The effect of this is to make executives paralyzed by fear, afraid that any accounting misstep or judgment call will lead to life in prison. To protect themselves from blame in case something goes wrong, today's executives spend inordinate amounts of time and money implementing, testing, and documenting the potentially unlimited internal controls demanded by Sarbanes-Oxley's vague Section 404.
"By treating businessmen as guilty until proven innocent, Sarbanes-Oxley has driven many great public companies private, many businessmen into retirement, and many other businessmen to stagnation and misery. This injustice and destruction must stop. Repeal Sarbanes-Oxley, and start treating American businessmen as American citizens."
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Alex Epstein was a writer and a fellow on staff
at ARI between 2004 and 2011.