Sen. Paul S. Sarbanes (D-Md.), the longest-serving senator in his state’s history, will retire next year rather than seeking a sixth term.
First elected to the Senate in 1976 after a career in the House of Representatives, Sarbanes has been the chairman or ranking Democrat on the Senate Banking Committee for several years. With Rep. Michael G. Oxley (R-Ohio), he was one of the lead sponsors of the 2002 law that bears their names.
His announcement comes just one day after the two legislators told a Washington meeting of corporate lawyers that the Sarbanes-Oxley Act has been a success, according to The Washington Post.
A number of politicians, as well as corporate executive lobbying groups like the Business Roundtable and the U.S. Chamber of Commerce, have been very critical of several provisions of the act and have called on Congress to change or scale back the scope of the rules. They argue that some provisions of Sarbox are either unconstitutional or too expensive and time-consuming to implement.
Sarbanes and Oxley, however, asserted that their critics have a short memory of how high-profile corporate failures like Enron Corp. and WorldCom Inc. cost hundreds of thousands of jobs, devastated company-sponsored tax-deferred savings accounts, and otherwise undermined investor confidence.
“In retrospect, some now are downplaying the financial crisis the markets suffered,” said Sarbanes, according to the Post. The senator warned of the threat of “collective amnesia” about “a systemic breakdown” in the recent past.
Oxley asserted that last year’s 414 financial restatements indicate that the governance law is helping to identify problems. Pointing to the earnings smoothing problems at Fannie Mae, he reportedly observed, “This should be sobering news for those who think Sarbanes-Oxley is no longer needed.”
Both legislators acknowledged that regulators must recognize the difficulties faced by companies in dealing with the Sarbanes-Oxley Act, according to the paper. Indeed, earlier this month the Securities and Exchange Commission granted an extra year to smaller companies and foreign companies to comply with Section 404 of the act, which guides companies’ assessments of their internal controls and auditors’ reports on those assessments. And next month the SEC will hold a rare roundtable discussion on the implementation of Section 404.
“We know the costs are real, but let’s remember this is also an investment for the future,” Oxley added, according to the paper. “How can you measure the value of…no more overnight bankruptcies with employees and retirees left holding the bag?”