Houston Chronicle: Oxley Has Faith in His Law
Washington, D.C., Of Counsel Michael Oxley, former Congressman, Chairman of the House Financial Services Committee and co-author of the Sarbanes-Oxley Act of 2002, was profiled in an October 29, 2009, Houston Chronicle article, "Oxley Has Faith in His Law."
According to the article, Oxley helped write the legislative response to the corporate scandals almost a decade ago, and the resulting law, which still bears his name. SOX, as it's more commonly known, was designed to address the abuses of Enron and WorldCom, to hold executives more accountable and to end some of the accounting games that companies played at shareholders' expense. The current crisis has a different cause, according to the article.
"Enron, WorldCom were clearly illegal activity," Oxley said recently, sitting in the Houston office of Baker Hostetler, the Ohio-based law firm where he now works. "The current situation was mostly legal—unregulated, but legal."
Certainly, the latest crisis will have its share of crooks. Bernie Madoff, after all, is already in prison. (Baker Hostetler is the firm representing the trustee in the Madoff case.) But the crisis runs deeper than that, Oxley said.
Despite the latest crisis, Oxley still believes the law, co-sponsored with Maryland Democrat Paul Sarbanes, created crucial protections for investors. Oxley, however, is quick to point out that SOX had its flaws. He's no fan of the law's most controversial passage, known as Section 404, according to the article. That section calls for companies to assess their internal controls, a provision many smaller businesses have claimed is too costly and that led some companies to argue that it required them to count paper clips. Section 404 was added in the Senate, not in his version of the bill, Oxley said. "That clearly was burdensome and too expensive," he said.
Nevertheless, he still believes Sarbanes-Oxley is an effective law. He cited a recent study that found most investors still have faith in the U.S. markets, despite last year's meltdown. Investors wouldn't have such fortitude if Sarbanes-Oxley hadn't helped stabilize the markets in the wake of Enron and WorldCom. "SOX was about transparency and accountability to restore investor confidence," he said. "Transparency beats regulation any day."