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 Amazon.com 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.