<?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Washington, D.C., March 8, 2005—The Competitive Enterprise Institute applauds the House Democrats’ Innovation Agenda for calling on Congress to take action on some of the burdens of the Sarbanes-Oxley Act of 2002. <?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
Introduced by Rep. Nancy Pelosi (D-CA), the Agenda includes Sarbanes-Oxley reform on its “to-do” list of policies to promote innovation. It commits House Democrats to supporting legislation that would “require specifically-tailored guidelines for small public companies to ensure Sarbanes-Oxley requirements are not overly burdensome.”
John Berlau, a fellow in economic policy at CEI, is impressed. “This shows there is now bipartisan recognition that Sarbanes-Oxley has gone beyond what lawmakers intended,” Berlau says. “It was rushed into passage after the Enron and WorldCom scandals. But it is punishing honest, entrepreneurial firms with billions of dollars in compliance costs and many thousands of extra man hours taken away from productive activity. The information from the audits of so-called ‘internal controls’ – such as software – that are only tangentially related to financial statements is also of questionable value to shareholders.
“While Nancy Pelosi’s Innovation Agenda for House Democrats does not offer a detailed proposal for reforming Sarbanes-Oxley, it is a breakthrough in many respects. It cites Sarbanes-Oxley by name as a potential barrier to innovation, despite the fact that the first name in “Sarbanes-Oxley” is that of a prominent Democratic senator. And, at least for small business, it calls on Congress to lessen the burden of the law. In this regard, she is going further than House Financial Services Committee Chairman Mike Oxley (R-OH), who still maintains that no legislative changes are needed, despite all the problems that have been highlighted with this law. Actions are what are most important, but words do matter. These words are bold, and Rep. Pelosi should be commended.”