Overview
Markets
should pick winners and losers, not cheaters. Consumers and investors
as well as employees and taxpayers need tough laws and tough rules to
guarantee that their investments are protected.
In
response to numerous accounting scandals and earnings restatements
epitomized by the collapse of both Enron and Worldcom, which caused
billions of dollars of investor and retiree losses and shook investor
confidence world-wide, in 2002 Congress passed the Sarbanes-Oxley
Corporate Reform Act. The law addressed conflicts of interest where
supposedly independent accountants, who the Supreme Court calls “the
public’s watchdogs,” instead look the other way while corporate
executives cook the books.
The
law, in Section 404, also requires corporate management, at the CEO
level, to certify annually to investors that their financial books are
clean of manipulation. In response, the business-backed U.S. Chamber of
Commerce has launched a campaign to roll back Section 404. The SEC
advisory committee has recommended that the smallest 80 percent of publicly
traded companies not be required to give investors the same CEO
certifications as larger companies. In a letter from PIRG, the Consumer
Federation of America and others, we argued that the advisory
committee’s recommendations:
are
in direct conflict with the law, would undermine investor confidence,
and do not fulfill the Committee's original charge to "conduct its work
with a view to protecting investors." Instead, we urge you to disband
the advisory group and to start fresh in your search for ways to
minimize the cost of regulatory requirements for smaller public
companies while retaining their important investor protections.
Several
bills have been introduced in Congress that would also roll back
Section 404 of the Sarbanes-Oxley Act. We are monitoring them closely.
