Sarbanes-Oxley Obsolete

Sarbanes-Oxley was passed in 2002, after the Enron and WorldCom disasters. Like all legislation by Congress, written and executed as a reaction to a media-enhanced investor-debacle, the law of unintended consequences is an ultimate result. Negatives far outweigh any positives.

Sarbanes-Oxley has been a great profit center for accounting firms. It’s also a good talking and campaigning point for populist politicians, but an expensive headache for companies.

Lots of smaller corporations no longer seek public funds because it has become too expensive for them to be publicly owned. Audits are too expensive.

What is more, the legislation helps little in preventing fraud, the intended purpose. That does special havoc with small business which cannot afford the added, expensive bookkeeping.

Moreover, this keeps foreign corporations, even giants, out of the U.S. or has existing ones reconsider their American status.

If any corporate executive wants to commit fraud, Sarbanes-Oxley will not prevent collusion to do so. On the other hand, anyone with corporate experience (that leaves out most in Congress) knows that Sarbanes-Oxley makes running a business more like a steeplechase or handicap than it should be.

Proxy Voting Changes

Attempts had been underway for some time for changes in the way proxy votes are permitted and counted. Under the new Dodd-Frank Act some have been finally legislated.

Street name votes must now have consent of the share beneficiaries. There are now nonbinding shareholder votes on compensation-related issues. Governance changes and board of directors compensation committee changes were also enacted.

Like other added restrictions on business, they serve little purpose, other than a play to a voter block that feels the corporation’s primary care is not its product or service, jobs and profits that enable it to operate, but to seek secondary social goals, almost simultaneously.

Anyone with hands-on business experience knows it is impossible to focus on both at the same time and be profitable. Only community organizers and social scientists with no top-level business experience think that way.

This fine-tooth-comb meddling is actually unfair to most shareholders because many activist minority shareholders are not really interested in genuine company matters. Their primary goals are societal concerns that ought to be rectified by federal, state and local government, not private corporations.

For years, they have clamored for changes in corporate activity which the vast majority of shareholders would not want. Today, corporations are being nudged by government to actually submit much of the proposals into their proxies.

The President and Moods and Sentiments

I have in the past discussed how moods are relatively long-lasting emotions; sentiments are shorter-term. Correspondingly, they can affect how stock market cycles react and can precipitate booms and busts in industry.

Therefore, our Chief Cheerleader, the president, in the midst of a deep recession, should never make it a practice of singling out an industry, whether industrial, communications, banking, insurance or lender of any type, as scapegoats when he wants the economy to recover and produce jobs.

Protecting Trade Secrets

The best and cheapest way to protect your trade secrets is to keep them under lock and key the best you can. Be sure your employees, customers or clients are not able to get at data that should not be made public. Of course, this is never simple.

Also, it’s logical at the very onset, to use trade names and logos that are hard to duplicate. Example: A made-up name such as Kodak.

The best and cheapest way to protect your trademarks, aside from registering them, is to actively use them in commerce. The laws are friendly only to those who fully employ the names, marks or logos they want protected. Even registration is not an outright guarantee.

Stay out of courts if you possibly can, when you have disputes that concern trade secrets or trademarks. Those with the most money to litigate will win.

Unfortunately, patent and trademark litigation contests often are not proud examples of prevailing justice.

The Dollar Gold Link and Bretton Woods

From 1947 until 1967, when we had gold- dollar convertibility, unemployment averaged only 4.7%, with economic growth about 4% annually. Plus the fact inflation remained relatively low.

In 1971, during the Nixon Administration, the Bretton Woods agreement set up a new system, including the International Monetary Fund and the International Bank for Reconstruction and Development, part of the World Bank Group. The U.S. dollar became the world reserve currency for the member states.

However, slower growth has ensued from that point, and gold today appears to be the preferred reserve of many countries.

America seems to have flubbed the job.

The Dodd-Frank Risk Cure?

Risk was never overcome by regulation. The media can more fully explain this, if they tried to find facts out for themselves and report them.

Example: Fannie Mae and Freddie Mac were risky semi-government agencies who were instrumental players in our sub-prime crisis. There was no lack of regulation.

But that financial meltdown has resulted in even more regulation with the likes of Dodd-Frank.

The EPA and the Democratic Process

Congress has not been able to pass a Cap and Trade bill. The public realizes the proposed legislation is a device for powerful government taxation. The measure is more a means for imposing taxes on industry and consumers, than it is for environmental protection.

So what does the Obama Administration do, in its effort to help reduce emissions it claims the bill will reduce? Especially when global warming is not scientifically proven?

It imposes controls through unelected bureaucrats in the Environmental Protection Agency (EPA).

Only they can make CO2, which we exhale, and trees ingest, a poison.