Sarbanes-Oxley: A Sense of "Siege"


As a former business leader, Treasury Secretary John W. Snow is well aware of difficulties that Washington policymakers can cause for Corporate America. So it's not surprising that when company chieftains complain about the costs of complying with the Sarbanes-Oxley corporate-reform laws, he listens. In an interview with BusinessWeek Senior Writer Rich Miller on Jan. 4, Snow shared his thoughts on what should -- and shouldn't -- be done in response. Edited excerpts of his remarks follow:

Q: Should Congress consider modifying Sarbanes-Oxley?

A: I don't think that's the real problem. Sarbanes-Oxley was critically important legislation that met a real need for the country at the time of those scandals... Sarbanes-Oxley played a very important role in reaffirming the norms of good corporate behavior, and, in some ways, I think [it] was absolutely essential. Corporate capitalism depends on trust.

Q: Are the regulators enforcing the law too aggressively?

A: The concern is with balance. The important thing is that, as fraud is dealt with, we recognize that all mistakes aren't fraud. It's important not to criminalize innocent mistakes. The nature of business is that you aren't always going to be right.... We ought to make sure, to the extent we can, that the regulators, the litigators, the prosecutors, and so on are working in a way that isn't excessively duplicative or burdensome, creating untoward risks of multiple prosecutions and regulatory investigations.

Q: Has the balance shifted a little bit too far in that direction?

A: I think we need to look at that question. It's an important question. I get a sense -- and you can't quantify this -- but I get a sense that the system may have become too prosecutorial, and without enough consultation between and among the regulators and the prosecutors. The sense that many businesspeople have is that they're under siege from serial investigations, and serial regulatory prosecutions, and criminal and civil prosecutions.

Q: What about the impact on the economy?

A: This will have an effect that's unfortunate for the economy. That's my concern...if businesspeople say, "Oh, my gosh, if I make a decision here, I'm making myself vulnerable." And what that does is, in effect, raise the inherent hurdle rates. And if you raise the hurdle rates, that means some investments that should have been undertaken, that would have been good for society, good for investors, good for shareholders, and good for the economy's growth, won't be undertaken.

That's what I worry about here. And I hope that we'll find ourselves getting into a more balanced environment.... I think that good judgment and common sense and balance are what's called for, so we don't have this perception by business that there is an uncoordinated, duplicative, and excessively harsh set of things they have to contend with all the time.

Q: Do you think generally the SEC has been doing a good job?

A: I'm an admirer of [SEC Chairman William H.] Donaldson and the SEC.... But what I'm talking about here is coordination among the SEC, U.S. attorneys, other regulatory agencies, and state's attorneys general.


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