Thursday, July 19, 2007
The Empire Strikes Back
The article at the link below summarizes efforts CEOs and their supporters have been making to roll back legislation intended to curb abuses.
Corporate leaders claim that Sarbanes-Oxley - nicknamed SOX here - drives "financial business away from the United States" and that efforts to comply with its accounting disclosure rules "cost too much". Worst of all, "last month the House passed an amendment delaying 404 reporting for smaller companies - the very ones most likely to issue false financial statements." The SEC chairman calls this "a terrible precedent", and it may well presage further rollbacks.
While some shareholder activists have proposed class-action lawsuits as a means of checking abuse in corporate boardrooms, the conservative judicial system is cracking down on such suits as "frivolous", and the number of new lawsuits "plunged to a record low of 110 last year."
The article concludes by reminding readers that, as the result of "a 1994 Supreme Court decision, shareholders cannot sue any corporate advisers - lawyers, accountants, investment banks - that 'aid and abet' a fraud." For instance, the courts recently killed a lawsuit against various banks and investment firms complicit in the Enron scandal.
The article appeared in Newsweek under the byline of popular investment journalist Jane Bryant Quinn.
"Little Guy Has Little Recourse" from Newsweek