THE WAVE OF CORPORATE ACCOUNTING SCANDALS MAY HAVE SUBSIDED, BUT ITS EFFECTS WERE STILL BEING DEBATED AT THIS YEAR’S DIRECTORS’ COLLEGE, WHICH DREW NEARLY 400 CORPORATE DIRECTORS AND CEOS to the law school last June for two days of talks and sessions examining governance issues.
• With characteristic wit, Berkshire Hathaway Vice Chairman Charles Munger focused much of his annual breakfast speech on the “simply awesome” amount of accounting fraud in the past decade—noting, however, reforms that followed scandals like Enron and WorldCom had some positive effects.
• “I think Sarbanes-Oxley has done more good than harm,” he said, then adding the caveat: “It’s like shooting an elephant with a pea shooter.”
• The co-sponsor of the act, former Congressman Michael Oxley (R-Ohio), also weighed in. During his keynote speech, he cited recent polls showing investor confidence levels at a five-year high and the overall strength of the economy as indicators that Sarbanes-Oxley has achieved its goal of re-establishing investor confidence in markets.
• “Of course there’s been overreaction [to the law],” he said. “I would argue that the overreaction has come from the regulators and implementers rather than the law itself.”
• One such regulator, Linda Chatman Thomsen, director of the SEC’s Division of Enforcement, responded to criticism that Sarbanes-Oxley requirements and excessive securities regulation are hurting American competitiveness in the global marketplace by pointing to a vintage Fortune article offering the exact same condemnation about the Securities Act of 1933.
• “The predictions of disaster made in the Fortune article nearly 75 years ago are eerily similar to the recent reports’ dire predictions about the effects of Sarbanes-Oxley and the purported doom of the U.S. capital markets,” she said. “But the sky was not falling in 1933, and it is not falling now.”
• Other speakers included Delaware Supreme Court Justice Jack B. Jacobs, who spoke about new director and shareholder paradigms and how these shifts are beginning to be reflected in case law, and former HP Chairman Patricia Dunn, whose talk surveyed the complex relationship between public pension funds and corporations. Now in its 13th year at Stanford Law, Directors’ College (directorscollege.com) has become the premier program for director education in the country.