How To Create More Jobs

TechDirt is spotlighting a call by Michael S. Malone, a columnist for ABCNews.com, for letting Silicon Valley create jobs once more. Malone argues that Sarbanes-Oxley and other attempts at accounting reform have done little to prevent fraud, but in fact have managed to kill off an entrepreneurship-venture capital-IPO cycle, centered in Silicon Valley, that has taken 30 years to nourish. Here's TechDirt: "...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). 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."

Comments

Perhaps we need fewer publicly traded companies.

[FatSean]

I mean, all those short-sighted boards focused on the next quarter to pacify greedy shareholders don't seem to be good for innovation or the long term.

Re:The whole SOX compliance thing was silly.

[Opportunist]

That's exactly the problem SOX has today, too. I was in the middle of a SOX audit at some large company over here that should remain unnamed to protect the guilty.

Aside of some rather ... fantastic requirements (like, administrators being not allowed to be able to read data but are responsible for its backup), we were doing checklists. Do this, check. Do that, check. Why? Don't ask. Just do it. Yes, it's pointless, yes, we know that (this is not a coworker talking, this is from the auditor), but it's in the book, so do it. We documented features that didn't exist anymore, we documented workflows that are neither relevant to the software nor ever used (or, if used, could be interpreted in any way wrong), and we were delayed by over two months in a project (costing about a manyear of work, for fluff).

The data we produced this way does in no way document the software, neither technically nor as an instruction manual. It does not show what the software does. It does not inform anyone about how values are calculated or why certain flags are being set. It does not give an auditor any relevant information that could enable him to identify something that could be used to "steal" money or hide a leak. It is utterly and completely worthless, but it does adhere to the SOX requirements.

And that's what's wrong about it. Companies don't want SOX to work. The people in the company that deal with SOX view it as a nuisance and something they want out of the way because it cuts into their actual work. Auditing companies only want to check off the requirements because it's the fastest way to get their money for auditing the company.

In short, NOBODY involved actually wants SOX to work.

Re:Misses the point!

[Red Flayer]

Malone is a boilerplate "Regulation is bad for business" guy who happens to be focused on the tech world.

He claims SOx has failed, he claims the costs are too high. Perhaps he forgets the cost of NOT having such regulation.

In addition, study after study has found that there are many benefits to becoming SOx-compliant, from risk attenuation to more accurate financial reporting, to streamlining processes via standardization. Googling "Sox benefits" will bring up quite a few, though you might need to wade through some marketing muck from companies whose line of business rests with providing compliance tools.

I can personally attest that Sox compliance has saved a former employer of mine tens of millions... potentially more, if certain practices hadn't been discontinued and happened to be caught by the SEC.

I think the main reason IT professionals hate SOx is that some of their work becomes drudgery. They fail to see the big picture, and from the finance side, I do what I can to make sure they can see how much it helps the company. As for it being an unnecessary burden on companies... tell that to the people who had their retirement savings in Enron stock. Tell that to the people who pinned their ability to put their kids to college on Worldcom stock. It takes a short memory to forget that confidence in large public companies in 2001-2 was similar to the confidence people have in the banking industry now. Would Malone argue that the best thing we can do for the general public now would be to deregulate the banking system further?

I'd also note that the small companies he refers to have a much easier time with SOx compliance, such as a longer period in which to become SOx compliant. Further, it's been demonstrated that the high cost of SOx compliance is in implementation, not in maintenance of compliance. For a start-up, it's easy enough to begin compliant... then you never have to face a huge expense in becoming compliant, since your processes have been compliant all along. Since a lot of the benefits of compliance are "soft" benefits (they are hard to assign an accurate value to), it's difficult to determine whether compliance costs outweigh compliance benefits... but since start-ups do not have to bear the brunt of compliance expense (in converting legacy systems and processes), I feel it's probably beneficial to be compliant.

Of interest, the SEC will be conducting a CBA of SOx compliance for small public companies in 2009. I'm interested to see what their findings are.

Anyway, thanks for doing a mite of research and refuting his cherry-picked data.

Sarbox kills productivity

[Russ Nelson]

Sarbox kills productivity. I have a customer who won't let me log in to do work because their auditor claims that if they ACTUALLY LET ME WORK, they'll have no control over, nor knowledge of, what I've done -- and Sarbox requires that they have both. It's an evil law and MUST DIE.

Re:There are other things first.

[Glonoinha]

Or you could make the application fee on the H1-B optional in size, non-publicized, and non-refundable. And the highest 'bids' get to have the H1-B.

At this point it really becomes a matter of 'we MUST have this guy because he's the only guy in the world that can do this work' and kick in a massive $40,000 as your application fee, guaranteeing that you get him. The top 65,000 applications (ie, the ones that sent in the highest application fee) get visas. The rest of them get absolutely nothing, but they don't get their application 'processing' fee back.

Make the visa good for 1 year, and they need to repeat the process each year or the guy goes back home.

All of a sudden, the companies that really need a certain skill get it. That's what the program is all about, so lets insure it works in a strong fashion.

250,000 applications averaging $10,000 apiece = $2.5 Billion. That is a LOT of money that could be poured into the education system, teaching our next generation to do the work that needs to be done by our employers. Pretty simple.

Re:Misses the point!

[sjames]

You don't have to be anti-regulation to be anti-sox. It is entirely possible to simply believe that SOX is excessively expensive and not sufficiently effective while believing that some OTHER form of regulation and transparency would be a good idea.

Remember, SOX has been in effect for several years and did nothing at all to prevent the mass financial irresponsibility (some of which WAS criminal) that has the economy so screwed.

You all are standing in the lobby of a skyscraper that is collapsing, preaching to the screaming people who are frantically running out the doors that 'this is exactly why we should enforce less standards when we build skyscrapers!' Everyone is looking at you like you are the retarded maniac that you probably are.

We are all standing in the lobby of a skyscraper that is collapsing and noting that the required expensive full cataloging of the exact color of each brick in the building did nothing but drive up the cost.

A funny thing happens when you place crazy demands on potential suppliers and partners. The ones with solid products and services tend to say no thanks, leaving the ones with barely adequate products who are just desperate enough for sales to jump through your flaming hoops to get one. You might get lucky and find a good supplier that had a run of bad luck, but probably not.

Either way, all that hoop jumping is expensive. Those costs WILL be passed on to the customer who demanded it. Adding a bunch of non-productive expenses is quite irresponsible!