In the National Review financial section article, “Cox & Sarbox”, the author, Mallory Factor, describes how the Sarbanes-Oxley Act (also referred to as “Sarbox”) has done more harm than good to the American economy. According to Factor, U.S. companies have sustained huge amounts of losses due to “compliance costs”; because of this, he advocates the repeal or reformation of Sarbox for the benefit of the economy.Due to costs associated with the implementation of Sarbox, small companies have suffered the greatest. Many companies (even large ones) have opted to go private instead of publicly trading their securities.
The downside of this is that going private raises the cost of capital and reduces the available securities that can be invested in by the general public. Other companies, both in and out of the country, have also decided not to register their offerings under U.S. markets due to the high costs of enforcing Sarbox.
Factor believes that Sarbox can be counter-productive in that it negatively affects the “risk-taking” attitudes of entrepreneurs. These attitudes, he says, stimulates “economic growth and innovation”. The act can hold CEOs and CFOs criminally liable for mistakes, even honest ones—Factor believes that this is unnecessary since there exists other means of fighting corporate crime even before Sarbox has been put in place.Factor believes that if Sarbox is not reformed, companies will “move offshore, switch to foreign exchanges, and go private” to escape costly compliance. Because of this, Factor suggests that the Act be optional for public companies. The money companies (especially small ones) spend on Sarbox compliance should instead be used towards other ends, particularly, in research and development (especially for companies that are innovation-driven).
It the end, it is the company which should decide whether or not Sarbox should be implemented within its organization.