It is a settled axiom in common law that “bad cases make bad law”. The same applies today. Sarbanes-Oxley is not only bad law, it will be a handicap to America’s competitiveness in the world markets, just as the hundreds of thousands of EU regulations are strangling European businesses. A prime example appeared in Thursday’s Wall Street Journal, in an article titled “Living with Sarbanes-Oxley”.
The article said: “Dow started its compliance efforts in mid-2003 by scrutinizing access to computer systems. It then went on to examine inventory-counting procedures at big warehouses and management's ability to question large accounting expenses, as well as profit targets in top offices. Targets that were too high could create pressure for managers to cook the books.”
It is clear from the Refco and Wood River scandals this Fall that managers inclined to cook books will cook books for their own reasons – personal civil and criminal liability will deter those they can; the others will not be found by SarBox “controls”. What we have just seen here is that it in now illegal for a public company in the United States to set aggressive profit goals. Isn’t that great? the EU has shot itself in both feet, so in the US we must put on leg-irons with a ball & chain, guilty and innocent alike.
The economic implications of that simple prohibition chill the blood.