The Financial Times and SOX

The Financial Times published aneditorial celebrating the 5th anniversary of SOX.  Noting the criticism of SOX, the Financial Times concluded:  "That reputation is largely undeserved. Given the political pressures that rushed the legislation through, its achievements – for example, in promoting audit committee independence – are perhaps more notable. Even companies that have struggled to comply concede that Sarbox has focused attention on the quality of financial reporting."

What was missing from the piece was a mea culpa.  How many times in the past has the coverage in the Financial Times been critical of SOX?  How about:  

• May 30, 2007:  "But the threat of continental Europe never materialised and the allure of New York appears to be diminishing for a variety of reasons including, but not limited to, the onerous regulatory requirements of the 2002 Sarbanes-Oxley compliance law. The London Stock Exchange, meanwhile, has developed into a top destination for companies from all over the world."
  
• Jan. 27, 2007:  "The NYSE has been losing market share in the listing of international companies to the LSE and there is widespread concern among politicians and bankers in the US that companies have been put off by its legal framework and the burden of complying with the Sarbanes-Oxley Act of 2002."
  
• May 22, 2006:  "Just as the heavy-handed imposition of Interest Equalisation Tax drove the Eurobond market from New York to London in the early 1960s, so the recent introduction of the Sarbanes-Oxley legislation on corporate governance in the US is making London more attractive for international companies." 

This is, I'm sure, only to name a few.  In the immediate aftermath of the adoption of SOX, it was easy to criticize the Act, as the Financial Times was happy to do.  It imposed an additional layer of costs and responsibilities on public companies.  It was easy to blame SOX for almost every negative development in the financial markets, whether the decline in the number of IPOs or the relative decline in the number of foreign listings.  Markets in London and other countries could use SOX to attract foreign listings. 

The harder task was to see past these chimeras and understand that, with greater obligation on the part of management (despite the costs), would come increased investor confidence.  As the Dow Jones Average hovers around 14,000 and the listing premium remains firmly in place (the premium that foreign companies get for listing in the US), the US remains the "gold standard" for liquid, well run securities markets, able to attract investors even during periods of economic uncertainty.  We welcome the Financial Times, however, belatedly, to this view.