William Donaldson hit back at critics of the Securities and Exchange Commission last month at the Council on Foreign Relations in New York, defending recent financial legislation, especially 2002's Sarbanes-Oxley Act. While not renowned as a blunt man, the 27th chairman of the SEC was keen to make his point.
"Some observers have complained that the pace of regulatory activity is 'damaging the long-term competitiveness of US companies and the US capital markets'," Donaldson said. "Notably, these complaints do not seem to come from those with the greatest economic interest in the long-term health of our public companies and markets. Indeed, investors have overwhelmingly supported our agenda."
And protecting investors is, after all, the SEC's statutory mandate – not pandering to corporate executives. But Donaldson acknowledged that companies have legitimate concerns with the cost of complying with Sarbanes-Oxley, most notably section 404, which requires executives to report to the Public Company Accounting Oversight Board about the effectiveness of their internal controls.
Part of the problem, said Donaldson, lies with the genesis of the legislation itself: "Sarbanes-Oxley was passed in a fit of anger. It was almost 100% approved, and got almost none of the vetting that normally happens."