More on the Sarbanes-Oxley Act
Read this article that explains the basic principles of the Sarbanes Oxley Act, which was passed in response to a series of large accounting scandals. This will help you understand some of the rules which govern public companies you may work for or invest in.
Criticism
Congressman Ron Paul and others such as former Arkansas governor Mike Huckabee have contended that SOX was an unnecessary and costly government intrusion into corporate management that places U.S. corporations at a competitive disadvantage with foreign firms, driving businesses out of the United States. In an April 14, 2005 speech before the U.S. House of Representatives, Paul stated
These regulations are damaging American capital markets by providing an incentive for small US firms and foreign firms to deregister from US stock exchanges. According to a study by a researcher at the Wharton Business School, the number of American companies deregistering from public stock exchanges nearly tripled during the year after Sarbanes–Oxley became law, while the New York Stock Exchange had only 10 new foreign listings in all of 2004. The reluctance of small businesses and foreign firms to register on American stock exchanges is easily understood when one considers the costs Sarbanes–Oxley imposes on businesses. According to a survey by Korn/Ferry International, Sarbanes–Oxley cost Fortune 500 companies an average of $5.1 million in compliance expenses in 2004, while a study by the law firm of Foley and Lardner found the Act increased costs associated with being a publicly held company by 130 percent.
A
research study published by Joseph Piotroski of Stanford University and
Suraj Srinivasan of Harvard Business School titled "Regulation and
Bonding: Sarbanes Oxley Act and the Flow of International Listings" in
the Journal of Accounting Research in 2008 found that following the
act's passage, smaller international companies were more likely to list
in stock exchanges in the U.K. rather than U.S. stock exchanges.
During
the financial crisis of 2007–2010, critics blamed Sarbanes–Oxley for
the low number of Initial Public Offerings (IPOs) on American stock
exchanges during 2008. In November 2008, Newt Gingrich and co-author
David W. Kralik called on Congress to repeal Sarbanes–Oxley.
A
2012 Wall St. Journal editorial stated, "One reason the U.S. economy
isn't creating enough jobs is that it's not creating enough employers
... For the third year in a row the world's leading exchange for new
stock offerings was located not in New York, but in Hong Kong ... Given
that the U.S. is still home to the world's largest economy, there's no
reason it shouldn't have the most vibrant equity markets-unless
regulation is holding back the creation of new public companies. On that
score it's getting harder for backers of the Sarbanes-Oxley accounting
law to explain away each disappointing year since its 2002 enactment as
some kind of temporary or unrelated setback".