A Tremendously Costly Law

Early this year, an unusual full-page ad appeared in the Wall Street Journal and other financial newspapers. The ad attempted to refute claims from businessmen about the costs imposed by the mandates of the Sarbanes-Oxley Act, the "corporate reform" law Congress passed in 2002 after accounting scandals hit Enron, Worldcom, and other companies. Yes, procedures stemming from that law "are neither simple nor inexpensive," the ad said, but the costs are well worth it if the result is restored investor confidence. "The [law's] greater goal and promise," the ad proclaimed, "is that the rigorous demands of compliance can lay the groundwork for improved and more reliable financial reporting, leading to a higher level of public trust."

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