Sometimes the Cure is Worse Than Disease
The Sarbanes-Oxley Act powerfully illustrates the law of unintended consequences. Due to hasty drafting by Congress in the wake of the Enron and WorldCom scandals, Sarbox has cost the U.S. economy over $1 trillion, according to one study published by the AEI-Brookings Center. To add insult to grievous injury, it is unconstitutional.
Even the statute's co-author, Rep. Mike Oxley, has conceded that Sarbanes-Oxley was hastily written and enacted. In its rush to "do something" about corporate scandals, Congress overstepped the bounds of its authority. It is time to call Congress back, both to help our economy and reaffirm that our constitutional system imposes clear limits on the government's urgent desire to "do something." Congress must be reminded that the "solution" is at times worse than the problem.
Ken Starr, dean of Pepperdine University's School of Law in Saturday's WSJ.