Double Standard for Corporations.

While I'm no SOX fan, I am a SOX expert. Nothing in SOX addresses bad business decisions, and that is what caught BS in the end. Stupid ain't illegal.

I also disagree that SOX has done nothing. It has brought internal control and governance to the forefront of the corporate world. The failure has occurred on the end of the Big 4 and the accounting profession in general. The 404 component of the act should have brought more scrutiny to the high level components of corporate governance and less at the transactional level. After billions of dollars were used implementing controls to prevent petty frauds in year 1 and 2 AS5 finally took Sarbanes to where it needed to be.

 

Frankly, I have strong reservations about the government protecting people or corportations from stupid mistakes and judgments by bailing them out. But when you are dealing with enormous corporations such as Bear Stearns or Chrysler whose bankruptcy could send serious ripples throughout the national economy, it is probably justified for the government to step in. There are always excetions to general principles. I try to avoid being too rigid. But I did not like the government assuming much of their debt. I felt a loan such as what was offered Chrysler would have been better.

 

Because over the long haul they bring in more taxes that they receive. In addition, such big stores such as Pro Bass serve as an anchor for greater development in their area. All business get tax breaks that are comensurate to their nich in the economy.

 

I was just reading what the BS former CEO, Jim Cayne, took out of the co. He was CEO from 1993 to Jan. 2008. His comp over those years was $230 million. His bonus for 2006 was $40 mil. In 2007, he got no bonus. His loss when BS was sold over the weekend, from its high in early 2007, $1.1 Billion!

Edited: As I look at the deal, rather than a bailout, I see a "gift" to JPMorgan by the fed. The gift bought them NOT having the words "bankruptcy" spread all over the headlines on Monday, and it prevented the next bank that BS owed money to, from having to declare bankruptcy also, because if it was not paid by BS, it could not meet it margin call either. And so on and so on. The gift to JPMorgan is they got the BS investment banking business for free, looks like.

 

Of course there are double standards for companies that bring in a billion times more money to the fed govt than uncle terrys gas and bait store.

 

True enough, but, for a mom and pop, it makes it almost impossible to compete head up when their overhead for taxes are high, right out the box.

 

After the smoke has cleared a little, looks like the Bear Stearns bondholders got bailed out at tax payer expense if this goes through.

http://www.hussmanfunds.com/wmc/wmc080324.htm

Not sounding too good there. Rather than a bailout, I called it a "gift" to JPMorgan, but it looks like the BS bondholders would in fact be "bailed out" under this plan.

 

these tax breaks are usually voted on by locals. or sometimes just passed by city councils.

but still a really bad idea.

almost as bad as local govt subsidy of alarm monitoring companies.

 

The problem with SOx is that is was, and still is, a terribly written and ambiguous law. It was dropped on public accounting firms to interpret and enforce with basically no guidance or framework what-so-ever. That's because the governing body (PCAOB) had no idea how to interpret or enforce it themselves. They were pretty good at pointing out flaws in the Big 4 methodologies however. So the accounting firms had to take a shot gun approach and try to hit ever possible control activity in order to cover all their bases. Obviously, with limited time and resources this method only allows you to skim the surface of many areas instead of doing a thorough job in specific high risk areas. After 4 years of slapping down the audit firms and giving vague guidance, the PCAOB finally released AS5 which gave SOx some structure...at least from the 404 standpoint.

While I do agree that SOx increased awareness and emphasis on internal controls around financial reporting, it did little to curb any actual fraud or diminish risks associated with the accounting scandals such as Enron and Tyco. The lost productivity and billions of dollars wasted on inflated auditing fees far out way any positives associated with the act.