These regulations might be messy but they contain valuable information that has been learned from this arms race. They're patches to try to prevent the same thing from happening again. It's much like computer security, where OSes and network protocols are constantly patched or re-engineered to be resistant to newer attacks. "Attacks only get better."
It may however be possible to improve Sarbox by reducing its complexity, thereby reducing the complexity tax that harms smaller companies and discourages growth IPOs.
There's a big problem generalizing from Enron. Enron was more complex than that.
There were two basic defects with Enron:
1) The energy traders were rogue by virtue of poor governance. The problem was baked into the compensation scheme there and could not be undone.
2) Skilling was rogue, but his sort of SPE manipulation was actually quite common.
The rest of the company is believed to have been fundamentally sound.
Enron was the big hero until they basically put CALPERS at risk. Then the story changed. I watched as the California energy deregulation unfolded. It was apparent that it would fail exactly as it did.
There's a larger background of boom-bust globally but especially concentrated in the US for ( I think ) path-dependent reasons. See "Nation of Deadbeats" for a semi-historical treatise on the subject. This goes back to John Law and the Mississippi Bubble - but each is different.
I don't get the feeling the whole subject is clearly understood. The dominant "left-right" beliefs are not helpful. The left believes regulation can fix it; the right thinks ... something else will ( usually a bland nod towards competition).
Thinking about stability is quite new. It's not clear we know what we're doing.
> They're patches to try to prevent the same thing from happening again.
Prevention by regulation IMHO creates as many problems as it solves because it punishes everyone involved, not just the guilty. I'm more in favor of prosecution (for fraud or insider trading, for example) as a method of prevention (where you just get punished for breaking the law after the fact).
The problem is that there is little will to prosecute people when things go really wrong. In terms of domestic politics, Arthur Andersen-ing a company and putting thousands of people out of work is untenable. And in a globalized economy, you don't want to develop the reputation of being the country that puts rich people in jail.
> And in a globalized economy, you don't want to develop the reputation of being the country that puts rich people in jail.
If they've broken the law and are found guilty, that's exactly what you want (rule of law, equality before the law and all that). Otherwise, I agree with you.
The problem is that "[i]f they've broken the law" is not such a clear-cut question. Sometimes it is (WorldCom), sometimes it isn't (Qwest): http://www.cbsnews.com/news/top-10-ceos-in-prison-whyd-they-.... This is especially true with white collar crime, where the difference between legal and illegal activity often revolves around intent. There is definitely the potential for the government to use white collar laws to keep meddlesome rich people in line.
Sure, but a jury trial is in itself a pretty disruptive thing. And it's very easy to bias juries against rich people, for obvious reasons. Even if the person is acquitted, it can be an effective way of keeping people in line.
Consider the investigation of Mark Cuban for insider trading, which didn't even result in an indictment or prosecution. I don't think it was politically motivated, but the mere possibility of that made a lot of people nervous.
A prosecutor isn't supposed to toss cases at a jury to "see what happens." The prosecution is supposed to believe 1) that the person actually did the crime, and 2) that a jury can be convinced of it. You can debate the specific thresholds of doubt for each of those prongs, but "I dunno, let the jury sort it out" is a very bad system.
Fraudsters and con men have been engaged in a Red Queen's race against investor intelligence and government regulation since there has been economies.
https://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis
These regulations might be messy but they contain valuable information that has been learned from this arms race. They're patches to try to prevent the same thing from happening again. It's much like computer security, where OSes and network protocols are constantly patched or re-engineered to be resistant to newer attacks. "Attacks only get better."
It may however be possible to improve Sarbox by reducing its complexity, thereby reducing the complexity tax that harms smaller companies and discourages growth IPOs.