Leave Sarbanes-Oxley alone
Judging by the words and deeds emerging from Washington you’d never know that several high-profile corporate fraud trials are once again in the public spotlight.
The trials include that of Bernard Ebbers, the former CEO and chairman of WorldCom,who on March 15 was found guilty for his role in an $11 billion fraud that bankrupted the company.
In New York City, L. Dennis Kozlowski and Mark Swartz – the two former highest-ranking executives at Tyco International when it was said to be based in New Hampshire – are still hearing testimony in their trial on charges of grand larceny, securities fraud and other crimes in connection with giant bonuses and other compensation they allegedly received as Tyco executives.
And Ken Lay recently emerged with an appearance on “60 Minutes” in which he attempted to defend his performance at Enron, the company he headed that remains the poster child for corporate greed, fraud and corruption.
Of course, none of these former executives has yet to be found guilty of anything, but that doesn’t mean the turmoil their respective companies put the nation through didn’t happen.
Unfortunately, members of Congress – including New Hampshire Sen. Judd Gregg — are acting as if the frauds never occurred in the first place.
Congress’ key response to the corporate frauds was passage of the Sarbanes-Oxley Act, which essentially gives shareholders more information about the companies in which they’re investing and makes it far harder for boards of directors and top executives to act against shareholder interests.
But over the last few months, there have been rumblings among members of Congress that Sarbanes-Oxley’s rules are too restrictive.
Perhaps the law does tie the hands of executives and directors of corporations, particularly publicly held corporations. But the reality is that the owners of the companies – the shareholders – have benefited greatly from the law, and attempts to water it down are nothing more than attempts to deny the historic corporate frauds that have been exposed over the last several years.
Senator Gregg, for example — at the behest of Fidelity Investments — purposefully inserted a measure into a spending bill last year that is nothing more than a back-door attempt to eliminate one of the key aspects of Sarbanes-Oxley: ensuring that chairmen of corporations are independent, without ties to management.
It’s unfortunate that the senator has decided to promote such a change, since New Hampshire securities regulators could give him a case study of what happens when a company’s board fails to adequately oversee actions taken by executives.
Two years ago, Tyco reached a historic $5 million settlement with the state to settle claims that the board failed in its fiduciary responsibilities — primarily because the directors and management were just too close for comfort.