Open Letter and Video Blog to Mitt Romney & Newt Gingrich Regarding Sarbanes-Oxley
My name is Teresa Bockwoldt, and I am a founder of Vibato, LLC and Sarbanes-Oxley subject matter expert. I would like to take this opportunity to respond to some of your public comments and stated positions regarding the Sarbanes-Oxley Act of 2002. Each of you has stated that this legislation is detrimental to American companies, their employees, and their investors. Since each of you has committed to work to overturn the legislation if elected President of the United States, and I completely disagree with this idea, I felt the need to publish this letter.
Each of you has made dramatic comments regarding the cost of Sarbanes-Oxley compliance, cited it as a cause of job destruction, and suggested that it is responsible for the collapse of the U.S. IPO market. Considering the severity of these comments, I will take some liberty here and assume that neither of you have actually had any exposure to the internal workings of a corporate accounting department since the inception of the legislation in 2002. To suggest that small U.S. public companies spent roughly $4,400,000 each (in 2008) to implement Sarbanes-Oxley (as Mr. Gingrich highlighted in his May 11, 2011 video on YouTube), or to suggest that Sarbanes-Oxley is the sole deterrent to an initial public offering due to its cost is simply not credible. It would be more credible to claim that Corporate Executives did not want to be subjected to oversight or accountability, or more likely, felt they would not stand up to this level of scrutiny placed upon them under the Sarbanes-Oxley legislation, so they used it as a convenient scapegoat.
I have implemented thousands of internal controls all over the world and I personally have yet to see a $4,400,000 internal controls implementation at any company outside of the Fortune 15. I believe we can all agree that the initial public offering process should be as cost-effective as possible, but what is the real cost of ignoring the need for supportable financial statements, which is what Sarbanes-Oxley strives to provide? Do you believe it would be more reasonable to the millions of investors to continue to risk suffering through the collapse of companies mirroring the behavior of Enron, Tyco, and WorldCom? U.S. public markets set the world standard for financial reporting quality because we have learned from our mistakes and dictated the need for corporations to provide proof of their financial integrity through legislation; this is called Sarbanes-Oxley.
Having provided financial and investment consulting services in the past, what would you tell the people who lost their jobs and life savings due to the unregulated lies their corporate executives told to the public markets? You should have known better than to invest in a blue-chip company?
The reality is that we were ALL fooled, so what would your justification be for returning to that regulatory scenario? Why, out of all available issues facing our country today, would you choose to jump on the bandwagon of taking us back to a time where companies are accountable to no one and executives can use shareholder assets as their personal piggy bank? Are you anxious to return to the days when former Tyco International CEO Dennis Kozlowski bought a $6,000 shower curtain using company (shareholder) cash?
There is ample evidence to support the belief that corporations running un-checked will drift away from “doing the right thing”, as we have all recently been painfully reminded of from observing unethical aspects of the home mortgage and Wall Street investment debacles. And, I believe that removing the controls that help ensure financial accuracy and transparency will ultimately destroy more jobs than any regulatory cost savings will produce, based on what I have personally experienced.
Would you fly on an airplane that no longer required procedures around the safety and maintenance checks prior to takeoff? That’s what you are asking investors to do when you repeal the controls around the accuracy and transparency of public company financial statements. It is likely only a matter of time before that airplane, or a public company with no regard for internal controls, will crash and burn.
Please do not sacrifice the liquidity, transparency, and relative stability of the U.S. public stock markets that our country has worked so hard to achieve under the misguided belief that these regulations are killing jobs and destroying our IPO markets.
I would welcome the opportunity to discuss this with you further and provide real insight “from the trenches” into what is happening today. There are many ways that public or pre-IPO companies can achieve the objectives of Sarbanes-Oxley within a reasonable cost structure, and we all benefit from that effort.
In fact, I will go so far as to offer you $10,000 each to publicly debate the effectiveness of Sarbanes-Oxley with me. I’m prepared to put my money where my opinion is, are you willing to spend your time supporting your position?
I hope you will investigate this matter further before supporting efforts to repeal the Sarbanes-Oxley Act.
CIO & Co-Founder