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

Huh?

[iLLucionist]

Why we need more Jobs? I think one instance is enough.

Misses the point!

[Anonymous Coward]

SOX is for publicly traded companies, not startups. By the time they are publicly traded, the need for VC is generally in the distant past.

Re:Misses the point!

[folstaff]

Yes and no. If a non-publicly traded company wants to do business with a company that falls under SOX, they may be subject to additional requirements (like an audit of internal controls). SOX is much bigger than most people think and bad for business.

Re:Misses the point!

[jcnnghm]

Your post title, "Misses the point!", is quite appropriate, since that's exactly what you did. Sarbox prevents large private businesses, startups, that aren't publicly traded from making the transition to being publicly traded, because of the incredible expense associated with getting into compliance. In other words, the millions a year it costs is acceptable to already publicly traded companies, but the millions that much be spent precludes non-publicly traded companies from making the transition, significantly raising the barriers to entry.

Re:Misses the point!

[FooGoo]

SOX and all the other auditing standards don't ensure accountability or transparency. As will most regulations the penalties are almost never enforced until something goes wrong. You can run a business with shady practices for years providing SOX certifications, SAS70 reports, and any other type of certifications and unless something goes wrong no one will ever know. To your point: Government regulation won't solve the problems of the financial market. Markets cease to be true markets when the hand of government is involved. The real problem is that companies are not held accountable for their failures. Government/corporate bailouts, subsidies, protectionism, and other forms of manipulation only serve to isolate society as as whole from inherent market risks....thus increasing our tolerance for risk and not having to deal with the true consequences of failure. Increased regulation will only push us more in this direction.

Re:Bypass the VCs and Code

[Slashdotvagina]

But there is a silver lining: capital is no longer necessary to start companies.

That's very true for software-based businesses. However, imagine someone with a great idea for a new type of processor that wants to compete with Intel. There's a LOT of capital required for manufacturing-based businesses in order to do proper R&D, establish factories, and so on... assuming the concept is so radically different that it can't be outsourced to existing fabrication plants.

Re:Single Tax

[ScentCone]

That tax should be a Money transfer Tax, for example 15% when you get paid, buy something, transfer money. etc.

Yessiree, that will keep capital circulating! Nothing inspires a person to move funds into a position to better fund a promising new company or other investment than to take 15% of that money away from you for seeing the opportunity. Yes! Punish investment! That should get some new companies and jobs under way.

Re:Single Tax

[Daimanta]

"Yessiree, that will keep capital circulating! Nothing inspires a person to move funds into a position to better fund a promising new company or other investment than to take 15% of that money away from you for seeing the opportunity."

It will keep the capital moving. Moving to the Cayman Islands, to Switzerland, to Monaco etc.

Nothing learned, Nothing Remembered

[Mutatis Mutandis]

SOX was the reaction to a series of big financial scandals, with the Enron affair being the best remembered. But back then, the reaction of many financial experts was to point out the deficiencies of SEC oversight and the weaknesses of the American GAAP accounting rules. The suggested answer was to seriously improve SEC oversight and adopt international IAS standards for accounting.

Instead we got SOX, an only too typically American solution, which puts its faith in forms and auditing. I think at the root of this is the Protestant mindset brought along by the Pilgrim Fathers, which insists that if something is printed on paper it must be true. It is the same mindset that requires travellers to the USA to confirm in writing that they are not terrorists.

And we got -- yes! -- another big financial crisis, caused by lax SEC oversight and creative financial practices. Well, even bigger and badder, if that helps.

Some people never learn...