Wednesday, December 24, 2008

Over Regulation

Think we're under-regulated? Not entirely. Sarb-Ox is an anchor tied to the necks of entrepreneurs. (H/T Slashdot)

For all of this, we can first thank Sarbanes-Oxley. Cooked up in the wake of accounting scandals earlier this decade, it has essentially killed the creation of new public companies in America, hamstrung the NYSE and Nasdaq (while making the London Stock Exchange rich), and cost U.S. industry more than $200 billion by some estimates.

Meanwhile, FASB has fiddled with the accounting rules so much that, as one of America's most dynamic business executives, T.J. Rodgers of Cypress Semiconductor, recently blogged: "My financial statements are a mystery, even to me." FASB's "mark-to-market" accounting rules helped drive AIG and Bear Stearns into bankruptcy, even though they were cash-positive.


Samay said...
This comment has been removed by the author.
Samay said...

Dude, Sarbanes-Oxley requires a minimum market capitalization for a publicly-listed corporation to apply.

What the hell kind of "entrepreneur" already runs a multi-million dollar publicly listed corporation?

Also, my dad knows TJ Rodgers, and he's a really nice guy, but kind of a nut in many ways. He also hasn't really come up with any new technical ideas since the late '80s.

Sockless Joe said...

Those were two paragraphs that just sort of happened to be together and I probably should have separated them when I quoted... Didn't mean to put Cypress in the whole startup/IPO deal. Several preceding paragraphs are about the friction caused in the VC/startup cycle, and my impression was that most of that friction was ongoing disclosure and compliance.

I quoted Rodgers because he expressed a sentiment that I've heard frequently (though rarely from someone in a CEO or other high executive position) - that nobody is really and truly compliant, and companies are sort of relying on a good faith non-enforcement from the government. When the crooks emerge, they throw Sarb-Ox at them and it's pretty much guaranteed to stick.

Samay said...

Of course people are going to try and minimize compliance as much as they can, but Sarbanes-Oxley is there to prevent major Enron-style malfeasance. If a VC can't figure out how to handle that, they shouldn't be in such a dicey business.

Samay said...

PS - most VCs are scumbag leeches anyways.