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Unfortunately, when those Section 404 audits began to be conducted for the largest companies, they were costly. Partly, that was caused by badly designed and overly cautious audits conducted by inexperienced auditors. Experience reduces costs to some extent, and in 2007, the Securities and Exchange Committee and the accounting oversight board adopted reforms to make the audits much less expensive.
The section has never been enforced for most companies. The S.E.C. repeatedly delayed the effective date for companies with market capitalizations under $75 million, as lobbying grew bolder and legislators like Senator John Kerry, the Democratic presidential candidate in 2004, opposed enforcement of the law. Mr. Bush`s last S.E.C. chairman, Christopher Cox, avoided making a decision by ordering one more study that would arrive after he was gone.
That study showed that Section 404 costs had come down significantly, and last month the S.E.C. under its new chairwoman, Mary L. Schapiro, announced that in the middle of 2010 -- eight years after the law was passed -- all public companies would have to start complying.
It took just one month for the House committee to vote to gut Sarbanes-Oxley. It voted to exempt those companies worth less than $75 million, and asked for a study on whether companies worth less than $250 million should be allowed to stop complying with the law.
In doing so, it turned aside a plea from Ms. Schapiro, whose opinions carry far less importance in this Congress than those of lobbyists who claim to represent small business.
The Supreme Court case, to be heard Dec. 7, is on the somewhat arcane question of whether it was legal for Congress to require that the members of the oversight board be appointed by the S.E.C. rather than by the president or someone directly responsible to him, like the secretary of the Treasury.
If the Supreme Court rules that the board is illegally appointed, Congress could quickly act to save it by changing the appointment process. But who can be confident that this Congress would want to save the reforms of 2002? |
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