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Jan. 17, 2007 When people make personal decisions in their lives based purely upon emotion, the results are generally less than stellar. From quitting a job in anger to overextending ourselves financially because we "fell in love" with that shiny new car or the house that's somewhat out of our means, we are all subject to feelings which drive bad decisions. Most of us know people who have gotten into financial, marital or even legal trouble primarily as a result of using something other than their frontal lobe, the portion of the brain most associated with reason and logic, in their thought process. This is not to say we should make it a goal to become emotionless androids as we move through life. After all, our emotions are a key element of what makes life worth living. And, certainly, our personal feelings do play a part in the decision making process. The key is to make sure there is significant cognitive aspect involved as well when life's big decisions are being made. Just as, for our own good, emotional appeals should not play an overriding role in our personal decisions, the laws which provide order to our society are also best when they are supported with well-reasoned arguments as opposed to politicians fluff. When laws are enacted to a significant extent because "something has to be done" it is time to be concerned. Our political process, however, particularly in the modern age when too many of us seem to have the attention span of a six week old puppy, appears to thrive on emotional rhetoric and quick sound bites. We are increasingly allowing shallow arguments to win out over more cogent and well-supported ones; the ultimate result of this cannot be good. One example of a piece of legislation that was largely supported with a "something's got to be done" mentality is the Sarbanes-Oxley Act of 2002. In the aftermath of the Enron debacle and other corporate scandals that thrived in the late 1990's confidence in the accuracy of financial information from public companies was in the toilet. The stock market, rocked by 9/11 as well as the malfeasance of many captains of industry, was driven into the proverbial basement, and threatening to sink lower. Clearly something had to be done and our leaders in Washington were just the ones to do it. Sarbanes-Oxley ( or SOX) was quickly passed and signed into law by President Bush in an effort to show the population that issues were being addressed and to help place some confidence back into the stock market. SOX, like most of what comes from Washington, D.C., is very complicated in its entirety. The essence of it is that corporate leaders would now be required to personally certify to the accuracy of the financial statements issued by their companies, and at the risk of criminal punishment. The Act also placed a tremendous amount of additional compliance burden on corporations; this is in addition to the endless amount of forms, schedules and reports that public companies already had to produce on a regular basis just to comply with existing laws (none of which prevented the criminal acts at Enron or other companies by the way). Public accounting firms had additional responsibility for evaluating their client businesses operations. No longer were they limited to issuing an opinion on just the financial statements, SOX requires them to issue opinions on the internal control structures of the audited organizations--specifically they have to issue an opinion on "Management's assessment" of internal controls. SOX created the Public Company Accounting Oversight Board (PCAOB), a non-profit corporation, to oversee how audits of public companies are being performed and make judgements on how the Act should be implemented. SOX may have been passed with the best of intentions; however, the results have been far less than desired. This law was rushed into production and passage based upon many emotional appeals. People, who had foolishly placed all of their retirement in the stock of one company, were angry. The media presented daily pictures of corporate fat-cats who had stolen and lied for years and were living in style as a result. Insinuations were made, without any foundation, that this activity goes on in all companies. We're all being cheated! The scandals fed the class warfare cauldron with a load of fresh oil. SOX was the opiate for the masses, at least for the financial market masses. SOX did provide some renewed confidence in financial information and the markets; however, it is really a paper tiger. The law was not well conceived and its benefits overall are dubious at best. It forced many chief executives to sign off on financial information which they do not generally understand (most corporate leaders are not professional accountants). It puts additional responsibility on the very public accounting firms which failed to notice the problems at Enron, WoldCom, etc., Does anyone remember a little firm called Arthur Anderson? This was the worldwide largest, most influential of all the big accounting firms and it was destroyed by its own incompetence (or complacency) in the Enron scandal; it's licene has been pulled. SOX has been a financial field day for the remaining accounting firms, though, as their fees for the additional services they were now required to provide continue to be through the roof. The Act is an administrative and costly nightmare for many small and medium sized companies attempting to compete in an increasingly global environment. The American stock market is feeling some crunch as foreign companies pull activity from domestic markets in favor of foreign locations, where compliance with SOX is not applicable. Even now, the powers that be, from the SEC and some Congressional leaders have discussed necessary revisions to the Act. At the end of the day, there is no definitive evidence that corporate financial reports are any more reliable than they were prior to 2002. Many feel this law only provided a false sense of security, as many hastily concocted plans to save the world do, and that we are being set up for this cycle to repeat itself at some point in the future. The bulk of the bureaucracy SOX compliance requires has little or nothing to do with what the crooks at Enron and other companies were actually doing wrong. It's filler, window dressing to please the public. A strong case can be made that it is better to remove all of the pretense and invoke more of a "let the buyer beware" philosophy on financial markets. This works well in real estate, why not with stocks and bonds? Too much legislation, from Sarbanes-Oxley to minimum wage mandates--is passed and signed based upon emotional appeals that "something must be done." It does not matter which political party endorses this legislation, it still represents creeping socialism. This liberal ideology is based upon the idea that needs have to be addressed--by government. Politicians from both parties, and the liberal press, are adept at creating the appearance of a problem or injustice and using emotion to whip up the masses. "Something must be done" becomes the mantra and bad, even dangerous and misleading, laws are passed as a result. Ironically, new legislation just serves to add to the very regulatory mess that failed to identify the current problems. Those who point out the madness are often castigated for not caring or being heartless. The hidden societal costs are overlooked and opposing arguments are overwhelmed by rhetoric. Nobody wins when this happens. The next frontier for this emotional game-playing is nationalized health care. We're hearing the drumbeat of "something must be done" on a more regular basis. Are you scared yet? ------------ About the author: Ed Abraham is a concerned citizen living in flyover country, U.S.A., who happens to be truly disgusted by the loss of common sense in our society and is doing all he can to try to reinstall it. Email: eabra@myway.com Comment on this article here! ------------ All articles are EXCLUSIVE to Useless-Knowledge.com. Please link to this article rather than copying and pasting it onto your site (which would be unauthorized and illegal). |
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