Wednesday, January 21, 2009

Tech Community to Obama: Repeal Sarbox!

In many respects, PC Magazine's John Dvorak speaks for Silicon Valley, which is fed up with the unintended consequences of Sarbanes-Oxley.
Sarbanes-Oxley makes it nearly impossible for an American start-up to make a public offering and survive it. Designed to curb the excesses and crookedness that lurked behind the Enron scam, MCI, and other financial catastrophes that took place in the early part of the decade, this law contributed to the out-and-out financial meltdown we are now witnessing. And how did it benefit anyone?

What Sarbanes-Oxley has done is add an outrageous reporting burden, which costs an estimated 4 percent of revenue to implement. All American corporations are immediately put at a disadvantage to the tune of 4 percent off the top. And what's the point of these new requirements? Simply to get accounting firms off the hook for cooked books or criminal activity. It has nothing to do with protecting the public, just protecting the accounting firms.

Venture capitalist Tim Draper once told me that a company has to make $300 million a year to be able to afford the overhead required to comply with Sarbanes-Oxley. Less than that and public corporations just bleed to death.

No matter what you think of Sarbanes-Oxley, one thing is very noticeable: Since the law's inception, the number of little Silicon Valley start-ups that went public is close to nil. This is the worst IPO market in years, and it's stifling the country. IPOs have been a traditional form of wealth creation and corporate protection unlike anything else. And you've seen what has happened without them. It's no coincidence that the economy is tanking. Sure, you can blame the housing bubble. But I blame the whole financial collapse on Sarbanes-Oxley and a moribund Silicon Valley.

If any savvy business people can manage it, they need to get Obama to lead the way in repealing this stifling and corrupt law immediately. It's done us no good whatsoever and promises to continue to slow progress. The country will be perpetually in a recession unless we realize what's at the root of the problem.
In today's pro-intervention environment, peeling away the major showpiece legislation of last meltdown might be wishful thinking.

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