Sarbanes Oxley — SOX as it is known for short (along with some other names I can’t mention on a PG-rated business blog) — is a federal U.S. law that was passed after the Enron scandal as a way to crack down on Corporate fraud. It imposes strict financial recordkeeping, auditing and reporting requirements.
Since the law’s passage, a growing group from academia and business have criticized it, especially when it comes to small businesses. The latest person to criticize the law is Elliot Spitzer, U.S. Attorney General for the state of New York, as this Reuter’s report notes:
New York Attorney General Eliot Spitzer on Tuesday joined the chorus claiming that stricter rules under Sarbanes-Oxley legislation may have gone too far and are hurting smaller companies.
“We’ve seen some unintended consequences from Sarbanes – Oxley,” said Spitzer in a meeting with the Association of American Publishers in New York. “It has created an unbelievable burden for small companies and may be preventing some initial public offerings.”
Spitzer has been called the Sheriff of Wall Street for his aggressive pursuit of corporations and individuals for alleged fraud. You could have knocked me over with a feather when I read over at the Sox First blog about Spitzer’s sentiments. He is the last person I would have guessed to be against Sarbanes Oxley. That tells you how bad the law is, when even the Sheriff says it went too far.
Perhaps this signals that enough public support has built up to reform Sarbanes Oxley.
By the way, the term “small business” used in the same mention with Sarbanes Oxley is a relative thing. Don’t let it confuse you. Sarbanes Oxley applies only to companies traded on a public stock exchange. A small publicly-traded business may have $400 Million in annual revenues, like Oglebay Norton the company where John D. Rockefeller got his start in business, that recently decided to go private due to the burden of Sox compliance. Four hundred million in revenue may be itsy-bitsy-teeny-weeny when compared to corporations on the Fortune 500 list, true. (Companies on the Fortune 500 have annual revenue in the billions of dollars.) But it’s not what we typically consider a “small business.”