The case against Sarbox

The Free Enterprise Fund has a Wall Street Journal opinion piece praising Nancy Pelosi. Surely a first. What caused hell to freeze over? "In the recent 'Innovation Agenda' that the House Democratic leader and her party unveiled, Ms. Pelosi acknowledges specifically the need to 'ensure Sarbanes-Oxley requirements are not overly burdensome,' and endorses reform." If that's not enough, the next sentence praises Eliot Spitzer for criticizing Sarbox's "unbelievable burden on small companies" and its possible role in "preventing some initial public offerings."

The Fund is the group that filed suit against Sarbox on separation of powers grounds. Whatever the merits of that suit, there appears to be a growing consensus that Sarbox may be unduly burdensome, at least on small business:

Based on a growing body of theoretical and empirical research, the SEC's Advisory Committee on Smaller Public Companies concluded that Sarbox places a disproportionate compliance burden on small public companies, making it more difficult for them to compete with foreign companies and to a lesser extent with larger U.S. companies. Consider the survey by the American Electronics Association, which found that companies with sales of $100 million and under are spending 2.6% of their revenues on Sarbox compliance--enough to tip many of them from profitability into unprofitability. This makes it something of a challenge for these companies to innovate, compete or grow--or even survive.

Efforts to lighten that burden might be the most likely area for changes in the Act.