When Congress said "No more Enrons" and enacted the Sarbanes-Oxley (SOX, or oddly, Sarbox) corporate crime law in 2002, two core parts of the law were its creation of a new investor protection watchdog known as the Public Company Accounting Oversight Board and its Section 404 -- which requires CEO-certification of financial statements. These two investor protection measures have been under a relentless and unwarranted attack by the U.S. Chamber of Commerce. To believe the Chamber, you'd think that these important investor protection measures were steps toward a corporate apocalypse.

The result has been predictable. Both the SEC and the PCAOB have attempted to appease the Chamber by responding with a slew of anti-investor rollback proposals. These proposals by the government are being put forward despite any documentation of a real problem, and significant counter-evidence that the law is working fine.

As our PCAOB letter points out, one-time startup compliance costs are dropping dramatically for companies in their second year under Section 404, and further, the benefits of Section 404 far outweigh its costs:

Moreover, substantial evidence supports the conclusion that SOX 404 brings benefits that greatly exceed its costs. That evidence takes a number of different forms. These include: statements by institutional investors that they have seen significant post-SOX improvements in the quality of financial reporting; statements from senior managers of public companies that it has helped them to streamline and improve processes and make better business decisions; evidence that, absent the requirement, many public companies had failed to maintain adequate internal controls or report weaknesses in those controls; and academic research on the effects of SOX 404.

We go on to point out the following:

The significant difficulty that many public companies experienced in implementing Section 404 -- a factor that has helped to drive up implementation costs -- has been taken by some to imply a problem with the standard itself. AS2 [the implementing standard] can hardly be blamed, however, for public companies' poor compliance with a requirement that has been on the books for decades, for their lack of adequate competent personnel to oversee controls, or their failure to adopt adequate control systems.

We believe that the evidence clearly shows that SOX and Section 404 are working to clear up the misstatements and restatements that diminish investor confidence and wreak havoc on the markets.

Finally, the latest shrill attack on SOX is that has caused massive "Capital Flight" -- the claim is that companies are going public" not in New York or Silicon Valley, but in Europe and Asia, due to the new law. Yet, as we document extensively, their argument is not based on the facts:

In making its case against SOX 404, the business community has repeatedly argued that a relaxation of the standard is needed to preserve the competitiveness of U.S. securities markets.

Recent reports have thoroughly discredited this argument. For example, a study by Thomson Financial analyzing 20 years of initial public offerings (IPOs) reportedly found no noticeable ill effects from SOX. Instead, they found that foreign IPOs accounted for 16 percent of IPOs in the United States last year, the highest proportion in the 20 years covered by the study. Furthermore, the $10.6 billion foreign companies raised through U.S. IPOs last year represented a 23 percent share of U.S. IPO volume, the highest level since 1994, according to the study.

To the degree that the United States has seen a decline in its share of global IPOs, a number of analyses, including recent reports by Goldman Sachs and Ernst & Young, have clearly documented that other factors are primarily responsible. The Goldman Sachs analysis notes that U.S. share of global equity market capitalization dropped dramatically from 1970 to 2000, long before the passage of SOX, attributes recent IPO trends to "economic and geographic factors" as well as the spread of the "U.S. capital market 'culture'" and notes that U.S.-based but globally minded firms stand to benefit from the growth of world markets.

So, tweak the rules where necessary, but don't change them wholesale at the behest of the business lobby. The Chamber has made a lot of noise, but it is all self-serving and largely unsubstantiated.