The End of Sarbanes-Oxley? Good Riddance!

Last Updated Dec 7, 2009 2:57 PM EST

On Monday, the Supreme Court will hear arguments that challenge the constitutionality of substantial parts of the Sarbanes-Oxley Act of 2002, aka SOX. In the past, I've called SOX, "-- a royal pain in the you-know-what that taxes every company, hinders our competitiveness in an increasingly global market, and does little to protect investors."

I'm certainly not alone in having called for its repeal in Five Ways to Fix Corporate Governance:

Repeal or reform Sarbanes-Oxley. As a knee-jerk reaction to Enron and WorldCom that punishes every public company, taxes every shareholder, diminishes our global competitiveness, distracts our management teams, and employs hordes of consultants, accountants and lawyers, SOX excels. At preventing accounting fraud, who knows? It's not all bad, but goes way overboard.
Now, we'll see what the highest court in the land has to say about it.
At issue in the case is whether or not the Public Company Accounting Oversight Board, or PCAOB, which has broad regulatory and law enforcement authority in overseeing SOX, violates the Constitution's "separation of powers."

The Constitution states that all U.S. officers must be appointed by and accountable to the President. But PCAOB is actually hired by the SEC. And since SOX has no severability clause, the invalidation of one clause can take down the entire law.

According to the Wall Street Journal, we'd probably be better off without SOX and the PCAOB:

The accounting board's wide-open mandate--to make whatever rules "may be necessary or appropriate in the public interest or for the protection of investors" - has cost the economy nearly $1 trillion, according to a study by AEI and the Brookings Institution. The benefit is supposed to be investor protection. But despite these costs, the law did nothing to warn about the meltdown of mortgage-backed securities, much less expose Bernie Madoff or other fraudsters.
Well, you know where I stand on the subject. Let's see what tidings Monday brings.