… and why was Newt Gingrich so hopped up on repealing it during the Ames debate?
I’m a teacher, so by and large, my knowledge in re: how one starts and maintains a business comes from my reading. Strangely enough, though, I actually have some personal experience with Sarbanes-Oxley (henceforth abbreviated SOX), so allow me to try to explain what it is and what it means for American businesses:
In brief, SOX is a regulatory law that was passed in 2002 in reaction to the Enron and World Com scandals. Its intent was to tighten the financial reporting rules for public companies so that investor confidence could be restored. But – of course – like any other law that is passed in response to an embarrassment or disaster, SOX had quite a few unintended consequences.
Many years ago – before I started teaching – I had a crappy office job with a relatively large construction business, and during my tenure there, said company had to go through the process of becoming SOX compliant. Oh, God, was that a nightmare of truly epic proportions. Number one, the company had to buy new reporting software to keep track of their payroll, inventory, etc. Number two, everyone in the office had to be trained on that new software. Number three, new employees had to be hired to complete all the extra paperwork. Each one of these steps no doubt cost the company in question a significant sum of money. It also caused the company president of 20+ years to quit because he couldn’t handle the stress.
SOX imposes additional compliance costs on businesses (an average of $4 million plus annually), makes it harder for new public companies to get off the ground — and by the way, it also didn’t do anything to avert the 2008 fiscal crisis. So yeah — I can see why Newt is not in love with it.