Greenspan: Overhaul SarBox
Last week, former Federal Reserve Chairman Alan Greenspan joined the chorus of those calling for the overhaul of the over-reaching law (note that the “Dump SarBox” headline at Eweek is misleading):
September 26, 2006
BOSTON—The Sarbanes-Oxley Act is doing more harm than good and must be overhauled, Alan Greenspan told a technology audience here.
“One good thing: Sarbox requires the CEO to certify the financial statement. That’s new and that’s helpful. Having said that, the rest we could do without. Section 404 is a nightmare.” Greenspan’s remarks came at a meeting of the Massachusetts Technology Leadership Council here on Sept. 25. Greenspan was Chairman of the Federal Reserve board for 18 years, having retired in early 2006.
He said the evidence is clear that Sarbanes-Oxley strictures are driving initial public stock offerings away from the New York Stock Exchange and to the London Stock Exchange. Increasingly, he said, people recognize that Sarbanes-Oxley must be changed. “The pressure on getting 404 significantly altered is rising and is taking on a critical mass.” But he added, “You do not get a bill altered when the two names [Sarbanes and Oxley] are in the process of retiring. People are waiting until they are gone. Then, hopefully, changes will be made. Any bill that passes both houses almost unanimously, cannot be a good piece of legislation.”
A hearty “Good-bye, good riddance, and don’t let the screen door hit you on the way out” should be delivered to Mr. Oxley and Mr. Sarbanes this coming January.
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UPDATE: SoxFirst accuses Greenspan of reversing his position supporting SarBox in May of 2005, and “saying it should be scrapped.” First, that’s not true (the assessment of Greenspan’s speech at the link provided was that “most of the Sarbanes-Oxley corporate governance rules enacted in 2002 have become a ‘nightmare’ and should be scrapped as soon as possible.”), and the entry’s author tells us as much a short while later. Greenspan wants to keep CEO personal “certification” of financial statements; that may not be a majority of the BURDEN of SarBox, but it’s in essence what senators and congressmen voted for.
What now bothers Greenspan and what has bothered most other SarBox opponents since the law was enacted is Section 404, a vaguely written requirement relating to internal controls that has opened up a Pandora’s box of busywork and navel-gazing. 404 is distracting companies’ management and IT resources, imposing immense costs (just one example: external audit fees have typically doubled or tripled since SarBox), and (in my opinion) hurting companies’ competitiveness vs. foreign companies who don’t have to deal with this madness.
It took Greenspan a year of hearing reports from the trenches to believe that what a lot of us predicted would happen was indeed happening. Greenspan should be congratulated for changing his mind in the face of real evidence, something SarBox supporters stubbornly refuse to even think about.
