Some Laws Help

This Reuters story should be welcome news to working Americans. The Sarbanes-Oxley law, passed to ensure that companies' financial reporting is transparent and legitimate, is starting to make some headway. Predictably, corporate leaders fought this law from the get-go, on the flimsy grounds that it would cost too much. Well, they had the chance to provide financial statements legitimately without regulation; we ended up with Enron. And Global Crossing. And WorldCom. And Tyco. And Adelphia. But now, the mess is getting cleaned:

For all the huffing and puffing about the costs of complying with one of the final mandates of Sarbanes-Oxley, introduced in 2002 after a series of huge corporate scandals, there are clear signs that Section 404 of the Act is forcing companies to uncover some deeply buried accounting skeletons.

Regulatory estimates from a few weeks ago put the number of companies that have been forced to come clean at 500 to 600 of more than 10,000 corporations registered with the U.S. Securities and Exchange Commission.

Critic have argued the millions of dollars in extra auditing fees to determine if financial controls are adequate is money poorly spent, with no quantifiable return.

Yet Section 404 may be keeping Corporate America honest, or at least focused, say accounting experts, adding that the benefits of raising investor confidence will, over time, substantially outweigh the upfront expenses.

I guess unrestrained capitalists will have to, er, capitulate to the notion that sometimes, regulation has positive benefits for everyone involved. But I'm not holding my breath.