Nasdaq Vice Chairman Oxley Reviews Reforms Five Years Later

In a speech before an audience of Texas chief executives today, former Ohio Congressman Michael G. Oxley said his namesake reform legislation, the Sarbanes-Oxley Act (SOX), will likely undergo more changes.

“This is an evolving process,” said Oxley, who was the keynote speaker at a conference at The University of Texas at Dallas School of Management.

He said that the Securities and Exchange Commission and the Public Company Accounting Oversight Board would soon modify some SOX provisions to make the costs of internal control auditing more proportional, or in his words “scalable,” to the size and complexity of the company.

“There was a time element and so AS-2 (Auditing Standard No. 2, a section of SOX) came out. In retrospect, I think AS-2 was too rules-based as opposed to principles-base,” Oxley said. “But because of the pressures, nobody wanted to be perceived as being soft on corporate corruption. Nobody wanted to be seen as being coddling to corporate criminals.”

As for corporate directors who complain about over-auditing because of the post-Enron law, Oxley urged them to shop around to cut auditing costs. “The markets do work, and I say to my friends in corporate America, you’ve got to make them work.”

Five years after the scandals of Enron, WorldCom and the terror attacks on the U.S., Oxley, now vice chairman of the Nasdaq Stock Market Inc., looked back on the impact of the Sarbanes-Oxley Act, whose anti-fraud provisions and disclosure requirements were designed to restore investor confidence.

“It just seems to me we ought to stand back and remind ourselves we have been through a lot over the past five years….We lost a million jobs because of 9/11,” he said.

“The resiliency of the American system is the envy of the world. That’s why people want to invest here. That’s why people want to come here – because we have the basis of a constitution of a nation of laws, and we work at it. We face up to our problems. Many countries don’t do that,” Oxley said.

In response to a question about the sub-prime home loan crisis and how to calm investor jitters, Oxley said “You have to let losers be losers and pick up the chips and move on.”

Oxley spoke at the fifth annual conference of the Institute for Excellence in Corporate Governance (IECG) “Balancing Stakeholders Interests.” For a complete list of the day’s program, go to http://som.utdallas.edu/iecg/index.htm.

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