If Washington Wants To Create Jobs, It Should Get Out Of The Way In Silicon Valley

from the lead,-follow-or-get-out-of-the-way dept

Tue, Dec 23rd 2008 11:55am — Mike Masnick

It's already quite clear that Sarbanes-Oxley has done very little to actually prevent fraud of any kind, but it has been a tremendous burden, especially on smaller, innovative companies that help grow the economy and create new jobs. It's basically become a huge tax on tapping into public financial markets for growth. Michael S. Malone is now making the argument that if the incoming presidential administration is serious about creating jobs, it's time to roll back SarbOx and other accounting rules that have acted more for theatrical purposes rather than any legitimate reason. Basically, all they've done is create new reporting requirements that do little to nothing to either prevent fraud or clarify a company's actual financial position (its intended purpose). Regulators love these sorts of bogus rules because it makes it look like they've done something, when really all they've done is put up huge hurdles for actually doing anything. I'm all for radical transparency in financial info, but that's not what has been done. Instead, we've made it burdensome to actually grow a company -- and that doesn't help create jobs. It helps kill them.

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Filed Under: economic growth, jobs, sarbanes oxley

18 Comments

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:Lobo Santo, 23 Dec 2008 @ 12:08pm

"Legal" System.
Most of our law-makers used to be lawyers.

I'm pretty sure basic law classes include things link:
1 = 0
Swallowing whole Camels
Anything can be litigated
Laws are a magical force
0 = 1000
and
Laws vs Reality, Laws win!
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Dave, 23 Dec 2008 @ 12:23pm

But if they only passed useful laws...
what would we talk about? I mean Sarbanes-Oxley, CAN-SPAM, No Child Left Behind and the rest of the useless stuff keeps the legislators busy. If they actually only passed laws that made sense and would accomplish what they're designed to do, they'd realize the futility in passing most of them and just draw a paycheque each month for nothing.

Suddenly the courts would have time to deal with real crimes and the MPAA/RIAA would have to get real jobs.

Now that I think of it, I think that there ought to be a law that only good laws be passed.
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Adam Singer, 23 Dec 2008 @ 12:43pm

...sad
that lawmakers have to undo the unnecessary complexities created by misinformed people who were put in power to the detriment of society...
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Xiera, 23 Dec 2008 @ 1:00pm

Job Creation
This is only slightly off-topic, but the idea of government getting in the way of job growth is particularly disturbing to me after the recent presidential election, during which the winner ran on the premise that higher taxes for businesses (and families) making over $250k annually would be a good thing for the country. It would seem to me that this would destroy the economy (even more).

An article I read recently suggested that over 90% of our annual GDP growth comes from small companies that experience rapid growth (and job creation), and cited that these companies usually earn over $250k annually, but not a substantial amount more than that mark. Unfortunately, I do not have a link, have not done the research myself, and therefore cannot provide support for that claim, so take it as you will.

The so-called SarbOx situation seems to be just another way government is obstructing innovation and providing incentive NOT to start a business.

Government, you CAN have a positive role in the economy, but not by providing hoops to jump through, hurdles to leap, or other obstacles to avoid. Your role is stimulate the economy, not to regulate it. Your role is to enable growing companies to create jobs, not to penalise growing companies and stifle job growth.
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Anonymous Coward, 23 Dec 2008 @ 1:13pm

@Xiera

SarbOx has nothing to do with starting a business - it has to do with taking a business public.
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Xiera, 23 Dec 2008 @ 1:24pm

Re:
Fair enough. I withdraw that clause in my post.
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DueDoe, 23 Dec 2008 @ 1:47pm

Dole
Bail out the tax payers; the people! Corprations have no sole!
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Alan, 23 Dec 2008 @ 1:55pm

re Dole
DueDoe - they may have no 'sole' but a lot of them are very well-heeled
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DueDoe, 23 Dec 2008 @ 2:06pm

Re: re Dole
Guesss I misspelled sole "SOUL" How do you spell Depression  “REPUBLICAN” !
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Jane, 23 Dec 2008 @ 2:58pm

You ignorant slut
This is how Washington creates bureaucratic jobs, stifles competition, and ensures big money from lobbyists.

The largest corporations designed and paid for these laws to keep their competition at bay.

It'll never change, go back to sleep.
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Grimp, 23 Dec 2008 @ 4:48pm

Re: "Legal" System.
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Grimp, 23 Dec 2008 @ 4:54pm

Re: "Legal" System.
LOLLAWYERS AMIRITE?

Actually our laws are a mess because of politics. Being a lawyer only makes it so you can argue your side effectively. 1 doesn't equal 0 just because you went to law school, 1 = 0 because you managed to convince a lawmaker to put 1 = 0 into a bill or a judge to interpret 1 as equal to 0. This is even before getting into bias on the lawmakers' and judges' parts, corruption, etc.

Law school doesn't make people idiots, it merely gives everyone, including idiots, training they can use to change things.
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Roland, 23 Dec 2008 @ 6:22pm

regulations and openness
Some regulation is needed, but SarbOX isn't it. Here's a
better idea, from Mark Cuban of Dell:
http://blogmaverick.com/2008/12/16/the-sec-madoff-and-xbrl/
Financial transparency and automated legal compliance!
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Chris Coles, 24 Dec 2008 @ 3:19am

If Washington Wants To Create Jobs, It Should Get Out Of The Way In Silicon Valley ??
This is a much deeper problem than simply a matter of access to IPO's and while the Grant Thornton paper http://www.grantthornton.com/staticfiles/GTCom/files/GT%20Thinking/IPO%20white%20paper/Why%20are%20I POs%20in%20the%20ICU_11_19.pdf has merit, it only represents the problem from their particular viewpoint. The overall problem has been a complete lack of understanding of the underlying problem right at the grass roots of society where there is no access to capital at all. None, of any sort. The result has been a failure to recognise that, while everything seemed to be on track through the 1990's, instead the numbers of new companies was drying up due to there not being any source of available capital taking a long term viewpoint alongside a complete failure to recognise that there had been in progress a long term collapse in manufacturing; which was by then reaching its zenith. You lost countless thousands of privately owned companies while fewer and fewer were being formed BELOW your observable horizon.

At the same time, everyone stopped thinking about the effect of placing almost all the capital, (savings?), of the nation into the hands of Institutional Investors that were by then, through a variety of regulatory measures, now totally constrained from investment into the grass roots of society. The reality of everyone focusing upon the IPO resulted in no one recognising that there is a desperate need for perhaps several tens of thousands of sub IPO company formations to be adequately capitalised from the savings of the nation. I first set out my thinking to The Governor of The Bank of England, Eddie George in 1994 and recently posted this as a proposal for what I call a capital Spillway Trust here. http://www.chriscoles.com/page3.html

Venture capital was, is, totally focused upon a tiny fragment of the capital needs of any nation but falls short of the needs of a fully free enterprise nation. That process, Venture Capitalism, is not, in my humble opinion, free market based and as such is doomed to failure over the long term as more and more new ventures reject the VC route to available capital on offer. (What, you have not noticed?). But there is no other route to available capital as it is all mostly now in the hands of Institutional Investors that have no retained function for the long term capitalisation of the new, grass roots company. THAT is the underlying reason for the fall off in the IPO marketplace. I have tried my best to illuminate the debate here on iTulip. http://www.itulip.com/forums/showthread.php?t=5166

You do not have any savings, or classic "Savings Institutions", or a recognised long term strategy to capitalise your capitalist free enterprise nation; particularly at the grass roots of society. What you have instead created is a feudal mercantile economy that has now failed. The IPO problem is merely a single symptom of the overall problem that must now be addressed if the Western Capitalist system is to continue to prosper. You have to return to good old fashioned Capitalism and relearn how to create new, free enterprise companies at the grass roots of society; that inevitably lie well beneath your present horizon, but surely not beneath your dignity?

Chris Coles
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gene_cavanaugh, 24 Dec 2008 @ 10:02am

Sarb-Ox and jobs
Has anyone noticed that burdensome accounting rules tend to work against small companies (who don't provide much in the way of campaign funds) and are much less burdensome for the large, dinosaur companies the small companies want to compete with (and who do provide large campaign funds)?
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Anonymous Coward Deux, 24 Dec 2008 @ 6:15pm

SOX
Can’t help but wonder which “accounting rules have acted more for theatrical purposes rather than any legitimate reason.”.
Thinking about the hundreds of crooks doing time for accounting and other indiscretions because of SOX.
Thinking about the tens of thousands of lives that have been altered by Bernie Madoff.
“reporting requirements that do little to nothing to either prevent fraud or clarify a company's actual financial position” - Mr. Masnick.
Can’t help but wonder what world Masnick is living in.
It is certainly not this one.
Me, I’ll listen someone like Matthew Friedrich, acting assistant attorney general in charge of the Justice Department's criminal division than a Mike Masnick, who is well aware of which side his bread is buttered.
http://online.wsj.com/article/SB123006806136731063.html?mod=googlenews_wsj
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Anonymous Coward Deux, 24 Dec 2008 @ 6:16pm

SOX
Can’t help but wonder which “accounting rules have acted more for theatrical purposes rather than any legitimate reason.”.
Thinking about the hundreds of crooks doing time for accounting and other indiscretions because of SOX.
Thinking about the tens of thousands of lives that have been altered by Bernie Madoff.
“reporting requirements that do little to nothing to either prevent fraud or clarify a company's actual financial position” - Mr. Masnick.
Can’t help but wonder what world Masnick is living in.
It is certainly not this one.
Me, I’ll listen someone like Matthew Friedrich, acting assistant attorney general in charge of the Justice Department's criminal division than a Mike Masnick, who is well aware of which side his bread is buttered.
http://online.wsj.com/article/SB123006806136731063.html?mod=googlenews_wsj
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Anonymous Coward Deux, 24 Dec 2008 @ 7:01pm

If Washington Wants To Create Jobs, It Should Get Out Of The Way In Silicon Valley ??
Though the Grant Thornton paper “represents the problem from their particular viewpoint”, I ponder why an astute investor would invest in an IPO in a less regulated market.
Recent events would indicate that the term ‘Regulated’ anything is a simple sop, as the regulators failed miserably, criminally in my view, in the performance of their responsibilities.
Exhibit A: Bernard L. Madoff Investment Securities LLC. I believe that Institutional Investors are experiencing some difficulty since Barnie’s institution went belly up.
Your statement, “The overall problem has been a complete lack of understanding of the underlying problem right at the grass roots of society where there is no access to capital at all.” is spot on!
Here in ‘the Land of the Free”, despite hundreds of billions of taxpayer wealth being poured into the remaining banks, no credit has trickled, slid, echoed down to anyone but the whales, who I am certain will, after bonus disbursement (think AIG) gobble up their lessers with OPM.
Americans are big on Credit Scores, but why bother having one when no one is lending? Perhaps that is why a growing number of responsible citizens are not paying their monthly minimums to the lenders.
The time when Debt was treated as Income has come to a crushing conclusion and American Express has become a bank. Amazing.
Of well, back the Austrian School. I hear the skiing is superb.
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