SOX and Nacchio

Here is my short editorial in the Denver Post on the implications of the Nacchio conviction and an article in the same newspaper on the role of Sarbanes Oxley.  The Rocky Mountain News published an editorial on Saturday (the Rocky publishes on Saturday and the Denver Post publishes on Sunday), generally praising the trial and conviction but noting this about SOX:

• "We wish we could be equally pleased with the long-term prospects of the legislative reaction to the corporate scandals. Unfortunately, the centerpiece of that reaction, the Sarbanes-Oxley Act of 2002, has imposed a tremendous burden in paperwork and expense on corporations with only a modest gain, if any, in investor protection. As observers of America's markets have warned, the U.S. is no longer the location of choice for new stock offerings, with a large majority of the biggest initial public listings worldwide now occurring abroad. The reverse was true as recently as 2000."

The overall balance of costs and benefits of SOX remains to be determined but the suggestion that there are few benefits from the Act ignores much, including a return of investor confidence that has driven the Dow Jones Average to an all time high, a record number of restatements, and a drop in the number of securities fraud actions.  Not all of this can be attributed to SOX but it also cannot be ignored in assessing the impact.