The current buzz word in politics is “corruption.”  It cost Republicans the 2006 election and Democrats have promised to fix it when they take over in January.  But it wasn’t so long ago that buzz word was a buzz word in another realm – the corporate world.  Today, over at Townhall, IWF’s Carrie Lukas offers an update on corporate corruption and what the Government is doing to stop it:

-There were plenty of existing laws broken by Enron and Worldcom senior officials and some employees. But Congress wasn’t satisfied to let the judicial process work and watch the perpetrators get sentenced to prison. Instead, at least in part to demonstrate their disgust for this corruption, Congress created a thicket of new regulations through a law commonly referred to as Sarbanes-Oxley.

-Sarbanes-Oxley increased penalties for corporate malfeasance, instituted new requirements for companies’ disclosure of their internal audit systems, and made executives personally and criminally liable for their public financial reports. Not surprisingly, these new requirements entail significant costs for businesses. Compliance with Sarbanes-Oxley has cost companies an estimated $35 billion, a burden that is particularly onerous for small businesses.

Like many burdensome government regulations, this attempt to “help” isn’t all fun and games:

-Analysts worry that these regulations have made America a less attractive climate for business. These regulations, their costs, and the significant liabilities facing executives and board members may discourage small businesses or foreign entities from listing their companies on an American stock exchange.

-America’s business climate already has some significant drawbacks that make companies increasingly interested in locating elsewhere. Our complex tax code includes one of the highest business tax rates in the world. Companies face the specter of high legal costs from our litigation-happy society. Regulations that require businesses to provide expensive benefits and high payroll taxes make hiring American workers costly. Policymakers who complained about a lack of “good” jobs may want to consider if there was any drag from Sarbannes-Oxley and seek ways to make the United States more attractive for businesses.

-Sarbanes-Oxley’s intent was in part to do just that by reassuring investors about the security of investing in American companies. Transparency and reliable financial records certainly are critical to ensuring that investors have the information they need to evaluate companies and can comfortably invest their money. Yet policymakers need to carefully weigh if the new regulations’ benefits outweigh their costs – and with portions of Sarbanes-Oxley, it seems clear that the costs outstrip the benefits.

The message to businesses should be clear:  clean up your own house before the government steps in and tries to clean it up for you (and messes things up in the process).  Read Carrie’s article here.