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January 6, 2005
In the wake of the huge corporate scandals associated with Enron, WorldCom, and others more than two years ago, Congress adopted the most significant corporate reforms since the Great Depression. The Sarbanes-Oxley legislation was designed to ensure better business practices and protect Americans by requiring corporations to adopt more responsible accounting practices, publicly disclose more details about their finances and improve corporate governance. Now major trade groups representing bankers, mutual funds, and other financial interests are seeking to gut these regulations and undermine necessary scrutiny of their behavior.
- Corporate reforms are critical for protecting employees, consumers and investors from fraudulent and unethical business practices. Putting a slight twist on James Madison's famous formulation, if corporations were angels no public oversight would be necessary. Unfortunately, as the Enrons of the world prove, modern corporate America is plagued by endemic problems including phony accounting, market manipulation, and outright misrepresentation of key financial information. Employees, investors and consumers end up the losers and laws like Sarbanes-Oxley are vital to protecting the nation's interests.
- Corporate reforms are good for business. A new analysis of the Sarbanes-Oxley reforms by Business Week concludes that the law is "worth the trouble" for business. One benefit: "the intense scrutiny of accounting methods and internal controls has unearthed lingering problems in the way companies operate." Executives from GE and United Technologies credit the law for spurring improvements in their business practices. And Philip Strand, a top executive at SAS (a large software company) argues "many public companies should be looking at the new Sarbanes-Oxley financial disclosure the same way most of us should view spinach – it's just plain good for you."
- Major corporate interests and trade associations want to fire the president's SEC chairman for enforcing good corporate behavior. William Donaldson, President Bush's SEC chairman and long-time family friend, has effectively used the new legislative powers under Sarbanes-Oxley to help reign in corporate abuses. Now the president's corporate backers wanted him ousted. Several major industry groups including the Business Roundtable, the U.S. Chamber of Commerce and the National Association of Wholesaler-Distributor are trying to quietly get rid of Donaldson for doing his job. Thomas Donohue, President of the Chamber of Commerce, has described the implementation of Sarbanes-Oxley as a "runaway system of corporate destruction being run by [New York Attorney General] Eliot Spitzer and the people who work at the SEC."
Daily Talking Points is a product of the American Progress Action Fund. |
Daily Talking Points is a product of the American Progress Action Fund. |
