Pelosi on SOX

Many observers assumed that the Democrat takeover of Congress spelled trouble for the business community – more investigations, more taxes, more regulations. In particular, many observers predicted that the chances for reforms of the post-Enron Sarbanes-Oxley Act had gone to nil.

These pessimists, however, didn’t count on Nancy Pelosi. Sure, she’s an arch-liberal from the kookiest city in the US world, but she’s also dependent on Silicon Valley campaign cash. Hence, it came as no surprise to some of us that Bloomberg reported today that:

For Silicon Valley venture capitalists eager to weaken the Sarbanes-Oxley corporate-governance law, it may pay to have friends in high places. The speaker’s rostrum of the U.S. House of Representatives, for instance.

Nancy Pelosi, the leader of newly empowered House Democrats, received more campaign money this year from partners at Kleiner Perkins Caufield & Byers, the venture capital firm that helped launch Google Inc. and Inc., than she got from Democrats’ traditional friend, the AFL-CIO labor federation. She in turn has already identified revising the 2002 Sarbanes-Oxley law as a top priority when she becomes House speaker in January.

This is great news for the economy. As I pointed out in a TCS column:

Since SOX became law, our economy and capital markets have suffered from higher compliance costs in several ways:

>The number of companies going private (so-called “going dark”) has increased dramatically, with many firms citing SOX compliance costs as a principal reason for choosing to do so

>A growing number of firms choosing to rely on retained earnings or private equity rather than raising money by going public via an IPO

>Pre-SOX, 9 out of the ten largest IPOs had a US component; in the last year, 9 out of the 10 largest were entirely foreign

>Fewer acquisitions and ADR offerings by foreign issuers

The bottom line? SOX is costing our economy the proverbial bundle and the SEC’s response [has been] little more than whistling past the graveyard.

For more on the costs SOX has imposed on the economy and the need for reform, see my essay Sarbanes-Oxley: Legislating in Haste, Repenting in Leisure.

FILED UNDER: Congress, Economics and Business, , , , , , , ,
Steve Bainbridge
About Steve Bainbridge
Stephen Bainbridge is the William D. Warren Distinguished Professor of Law at the UCLA School of Law and the longtime proprietor of the law blog Professor Bainbridge. He did a guest stint at OTB in November 2006. Follow him on Twitter @ProfBainbridge.


  1. The reaction on the left if she does it is just icing on the cake.

  2. Fersboo says:

    Free market liberals! Who’d had thunk that? What was her role in the 2002 passage of SOX?

  3. Wickedpinto says:

    Pelosi on SOX

    I was so pissed and conflicted for a second.

    Fortunately, I learned that she wasn’t a SOX fan (either of them) but rather a rotten corrupt scumbag, like her own giants hero’s bloodstream.

  4. spencer says:

    WOW — SOX passed under a republican Congress and a republican president.

    it wouldn’t be another example of republicans being bad for business would it?

    If you want to live like a Republican vote democratic.

    so how are you going to blame this on democrats?

  5. Dave Schuler says:

    Just for the record, Steve, even small, privately held corporations aren’t safe from Sarbanes-Oxley. Several of my clients have been compelled to conform to its provisions by their Fortune 1000 customers (so that the Fortune 1000 customers could comply themselves). Consequently, the costs of compliance and the friction that compliance has introduced into the system is much, much higher than estimated.

  6. iaintbacchus says:

    While it’s a shame that SOX is costing American companies a lot to comply, I’m unable to overlook the fact that they brought this on themselves.
    Enron, TYCO, have taught us that no corporate board of directors can be trusted to govern itself. If coporate profits are lower, at least the money that I HAVE to invest in them for my retirement is less likely to be plundered.
    And I sincerly doubt that SOX is costing our economy as much as rockstar salaries and perks for senior management is.

  7. save_the_rustbelt says:

    With all this honesty nonsense, how can Wall Street and the CEOs steal all the money they want?

    Why, doesn’t the backdating of stock options prove that CEOs have reformed and seen the light?

    I’m waiting for the new disclosures on “pay consultants,” won’t that just be interesting, perhaps giving new meaning to conflict of interest. Or maybe incest.