Getting Rid of Sarbox

Sometimes the cure is worse than the disease. From the WSJ:

Question: What do you get when you cross corporate scandals with a panicked Congress in an election year? Answer: Sarbanes-Oxley, a bad law that, as it turns out, may also be unconstitutional.

At least that's the contention of the Free Enterprise Fund and its powerhouse legal advisers, who yesterday filed a federal lawsuit in Washington, D.C., challenging a key portion of the 2002 law. Filed with the help of Ken Starr and Michael Carvin, the suit argues that the Public Company Accounting Oversight Board, the quasi-private agency that Sarbanes-Oxley established to oversee the auditing of public companies, violates the Appointments Clause of the U.S. Constitution. It's a compelling argument and one that, with any luck, may finally spur Congress to revisit a law that has arguably done more economic harm than the scandals that inspired it.

Exaggeration? If only. The University of Rochester's Ivy Xiying Zhang last year looked at stock market reaction to Sarbanes-Oxley, finding that the law had cost public company shareholders $1.4 trillion. This is in addition to the billions of dollars companies are spending to comply with the law's new auditing and "internal control" regulations. Much of this windfall is ironically enriching the same Big Four accounting firms that everyone in politics blamed for the original scandals.