A coalition of U.S. business leaders and academics said Nov. 30 that U.S. business regulation has gone too far in the post-Enron era and urged reforms including an easing of the Sarbanes-Oxley law. The report, adding further weight to the reform movement, said the competitiveness of America's capital markets was being threatened by "excessive regulation and litigation."
The Committee on Capital Markets Regulation, an independent panel started by a Harvard University academic, called for urgent changes to shore up U.S. capital markets amid stiff overseas competition from London and Hong Kong for initial public offerings (IPOs). Citing a heavy fall in U.S .IPO activity, coupled with a rise in the number of American companies choosing to go private, the panel issued a report saying accounting standards had become too rigid in the wake of a flurry of business scandals including Enron.
The panel's report was issued a week after Treasury Secretary Henry Paulson called for a "more agile" regulatory framework for publicly traded U.S. companies. Paulson has signaled he is concerned about the decline in the number of companies seeking a public listing, or IPO, on U.S. exchanges.
The panel's report also said that criminal indictments of companies should be a "last resort," and that outside executive directors should not be held "responsible for corporate malfeasance that they cannot possibly detect."
Among other recommendations, the panel also said companies should ask shareholders to waive the right to a jury trial and seek recourse before a judge instead, as well as urging better coordination between federal and state securities regulators. Judges tend to approve lower damage awards against companies that engage in wrongdoing compared to citizen juries. The panel also backed a so-called principles-based rules system which is perceived as being less rigid for auditors. U.S. accountants currently operate under a rules-based system which is seen as being more onerous than the principles-based system favored in Europe.
Copyright Agence France-Presse, 2006