Michael Oxley has been guaranteed immortality — and perhaps a degree of infamy — since his name was affixed to the Sarbanes-Oxley Act of 2002, the most comprehensive set of corporate rule changes since the 1930s.
Earlier this year, Oxley retired from Congress after serving 25 years. However, the 63-year-old Republican from Ohio is not ready to fade from the scene. In the past month, he has picked up two new jobs: as counsel for the Cleveland-based law firm Baker Hostetler and as nonexecutive vice chairman of Nasdaq.
The act that bears his name missed unanimous passage through Congress by a mere three votes in the House of Representatives, and initially received grudging lip service from a shaken Corporate America. But a little-noticed section, just 168 words long, soon changed the debate from whether Sarbox was essential to restoring confidence in the U.S. capital market to whether it was destroying it. Section 404, which requires companies and their auditors to examine and report on the processes behind their financial reporting, quickly became the most expensive and hated provision of the act.
Today, Sarbox, and particularly 404, are under heavy attack, as are many of its accessory creations, most notably the Public Company Accounting Oversight Board. Both the president and many in Congress have said the act was poorly implemented, a criticism that neatly deflects the blame from those who made the law to those charged with implementing it. Technically, that’s the Securities and Exchange Commission, although almost all of the critics leveling that charge are actually referring to the PCAOB.
In his final months in Congress, Oxley took to the hustings to defend the act, but more recently has joined the chorus of voices who say that the act, if not wrong itself, was poorly implemented.
Ironically, the loudest protests seem to be taking place after the largest companies have been through the worst of the compliance effort, but the result appears to be that small companies are likely to be spared the same degree of pain.
At Nasdaq, Oxley will serve as an adviser to Nasdaq president and CEO Bob Greifeld and the board of directors. In fact, he is about to join Greifeld on a listening tour to meet with CEOs and CFOs of listed companies and to discuss recent efforts at the SEC and PCAOB to tweak the rules of the law he wrote. He’s likely to get an earful.
Oxley recently took time out to discuss the Sarbanes-Oxley Act and its many challenges with CFO.com contributing editor Stephen Taub.
Are you happy with the way Sarbanes-Oxley has been implemented?
Not really. The law has gotten a lot of criticism.
Why do you think this happened?
The main thing is the enormous cost that was driven by the outside audit. But, the auditors are under tremendous pressure too. Audits should be risk-based so companies can better assess the risks involved and move forward.