Sarbanes-Oxley: Should We Amend It or Repeal It?

WASHINGTON, December 7, 2009–Today the Supreme Court is hearing arguments about the constitutionality of one element of Sarbanes-Oxley, a law passed in 2002 enacting tougher accounting regulations on businesses. Legal technicalities aside, the case will likely not address a more fundamental question: Should Sarbanes-Oxley exist at all?

“Sarbanes-Oxley should be neither amended nor preserved. It is a fundamentally corrupt law that should be repealed,” states Alex Epstein, fellow at the Ayn Rand Center.

“Why have executives been complaining about the horrors of Sarbanes-Oxley? Not because they are cheats who want to get away with accounting fraud, but because the law treats them as if they are–as guilty until proven innocent. In the name of scaring CEOs straight, Sarbanes-Oxley holds them criminally liable for any ‘unfair’ accounting by any employee in their company–and gives the government incredible latitude to determine what ‘unfair’ means.

“The effect of this is to make executives paralyzed by fear, afraid that any accounting misstep or judgment call will lead to life in prison. To protect themselves from blame in case something goes wrong, today’s executives spend inordinate amounts of time and money implementing, testing, and documenting the potentially unlimited internal controls demanded by Sarbanes-Oxley’s vague Section 404.

“By treating businessmen as guilty until proven innocent, Sarbanes-Oxley has driven many great public companies private, many businessmen into retirement, and many other businessmen to stagnation and misery. This injustice and destruction must stop. Repeal Sarbanes-Oxley, and start treating American businessmen as American citizens.”