Schumer Calls For Re-Examination of Sarbanes-Oxley

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Today’s Wall Street Journal bring us a column jointly written by New York mayor Michael Bloomberg and Senator Charles Schumer calling for reforms—such as re-examination of Sarbanes-Oxley and a taming of our shareholder class-action litigation frenzy—to make New York at least as friendly to finance as London.

With the benefit of hindsight, the Sarbanes-Oxley Act of 2002, which imposed a new regulatory framework on all public companies doing business in the U.S., also needs to be re-examined. Since its passage, auditing expenses for companies doing business in the U.S. have grown far beyond anything Congress had anticipated. Of course, we must not in any way diminish our ability to detect corporate fraud and protect investors. But there appears to be a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth, for fear of facing personal financial penalties from overzealous regulators.
Second, what lessons can we learn from other nations' legal environments? The total value of securities class-action lawsuits in the U.S. has skyrocketed in recent years, to $9.6 billion in 2005 from $150 million in 1997. The U.K. and other nations have laws that far more effectively discourage frivolous suits. It may be time to revisit the best way to reduce frivolous lawsuits without eliminating meritorious ones.

Keep in mind that Charles Schumer co-wrote this—not Hank Paulson or Arthur Levitt. Charles effin Schumer. Almost makes you think the Democrats might be just about grown up enough to be trusted with running the Senate again.

To Save New York, Learn From London
[Wall Street Journal]

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