Even as the new Congress prepares to convene in just a few short weeks, it’s still unclear exactly what voters can expect in terms of big domestic policy changes. Tax policy, Social Security reform, healthcare policy, the environment—all these issues loom before the new Congress, but Democrats have not yet indicated exactly where they will take the country while in the new majority.
One priority is clear: Paving the way for more ethical government must top the agenda for both parties in the upcoming Congressional session. Democrats need to deliver on their most clearly articulated campaign promise and Republicans have to regain the trust of voters. This may mean Congress will create new laws to limit interaction between policymakers and lobbyists or eliminate earmark appropriations, which invite corruption.
While Congress attempts to clean its house, corporate America would be wise to do the same. Five years ago, the American economy was rocked by some of the biggest corporate scandals in history. Enron and Worldcom collapsed under the weight of massive fraud and corruption, ruining investors and employee pensions while shocking the public.
There were plenty of existing laws broken by Enron and Worldcom senior officials and some employees. But Congress wasn’t satisfied to let the judicial process work and watch the perpetrators get sentenced to prison. Instead, at least in part to demonstrate their disgust for this corruption, Congress created a thicket of new regulations through a law commonly referred to as Sarbanes-Oxley.
Sarbanes-Oxley increased penalties for corporate malfeasance, instituted new requirements for companies’ disclosure of their internal audit systems, and made executives personally and criminally liable for their public financial reports. Not surprisingly, these new requirements entail significant costs for businesses. Compliance with Sarbanes-Oxley has cost companies an estimated $35 billion, a burden that is particularly onerous for small businesses.
Analysts worry that these regulations have made America a less attractive climate for business. These regulations, their costs, and the significant liabilities facing executives and board members may discourage small businesses or foreign entities from listing their companies on an American stock exchange.
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