We like Alan Murray—and not just because he was so easy to beat up on when we were up against him on Squawk Box. He’s a smart guy but he’s a bit too credulous sometimes. And he constantly trips himself up on the grand illusion of our time—that moral problems can be solved by technical means. To cure a problem such as corporate fraud, all that is needed is a set of cleverly designed regulations. It is apparently very easy for the intelligent to forget that not all problems can be solved by the application of intelligence, even Alan Murray’s intelligence.
In the video above—and in his column on page 11 of today’s Wall Street Journal—you can hear him quickly jump from describing the Tom Wolfe-ian character of Conrad Black to the conclusion that we should be cautious about reforming or repealing Sarbanes-Oxley because, you know, it’s supposed to make doing bad things harder.
Larry Ribstein isn’t so sure. First of all, he wonders, what evidence is there that Sarbanes-Oxley really would do much to prevent the kind of intentional wrong-doing alleged in the Black case? “Indeed, it’s unclear that SOX would have prevented even Enron, which had a completely independent audit committee,” Ribstein writes.
But the real problem with Murray’s argument is even worse—like so many of the arguments for regulations that stem from anecdotal tales of wrong-doing, it fails to even attempt a basic cost-benefit test.
As Ribstein writes:
…even accepting Murray’s conclusion, this is not an excuse for SOX. Is it really worth huge costs to thousands of legitimate companies to (possibly!) prevent one Conrad Black? Do we really need a massive federal law to “mak[e] it clear that directors work for shareholders, not management.” In firms where directors and managers don’t already know this despite an already large structure of federal and state criminal and civil remedies and regulation, is SOX 404 really going to make a difference?