WASHINGTON – A chief difference among Maryland’s Democratic U.S. Senate candidates this year may be their attitude toward changes to the signature corporate responsibility legislation crafted by the lawmaker they hope to replace.
Retiring Sen. Paul Sarbanes, D-Md., was the driving force behind the Sarbanes-Oxley Act passed by Congress in 2002 in response to corporate scandals, including those of Enron and WorldCom. The widely praised legislation was designed to improve accountability in the business world by requiring internal audits and independent checks on publicly-traded companies.
But now critics say it was approved hastily and the reporting requirements force an undue and expensive burden on small businesses, which should be exempt.
The Securities and Exchange Commission Advisory Committee on Smaller Public Companies agrees small businesses should not be subject to the Sarbanes-Oxley requirements, as do two of the seven Democrats who want to replace Sarbanes, who is the ranking member of the Senate Committee on Banking, Housing, and Urban Affairs.
Forensic psychiatrist Lise Van Susteren of Bethesda called the law “burdensome,” and said exemptions must be considered.
Josh Rales, a businessman from Montgomery County and former Republican, said some changes are necessary for the law to remain effective.
“There has been significant feedback from the business community that Sarbanes-Oxley has been disproportionately burdensome and challenging for smaller public companies,” said Alyson Chadwick, a Rales spokeswoman. “There will likely need to be some adjustments made to an otherwise very effective law.”
Sarbanes has thrown himself into the law’s defense, citing more than a dozen sources, including studies and essays by businessmen.
“The law is working as intended; auditor independence has been restored,” Sarbanes said. “We had an extremely through and careful set of hearings.”
Sarbanes has been influential in finance legislation and Sarbanes-Oxley is considered by some to be the most groundbreaking such legislation since the New Deal.
The Democrat leading the polls, U.S. Rep. Ben Cardin, D-Baltimore, declined to take a position, but said there is “legitimate concern” for smaller publicly-traded companies and new hearings should be held because the law “was not meant to be the end.”
Meanwhile, former congressman and former civil rights organization leader Kweisi Mfume said he was concerned and acknowledged there are “flaws” in the law, but said he was “hesitant” to support changes without knowing more.
Another candidate, history professor Allan Lichtman, is against “fundamental” changes and said the law does not hurt free markets. Exemptions for small businesses, he said, “would turn back the clock.”
The law is likely to play an even stronger defining role in the general election in November. Republicans tend to attract more small business owners than Democrats, said Ronald Walters, a government and politics professor at the University of Maryland, College Park.
“In this round, people tend to make their minds up on party loyalty and personalities of the candidates,” Walters said.
The likely Republican candidate, Lt. Gov. Michael Steele, said in a statement that public companies should be held accountable to their stockholders, their employees and the public.
“He looks forward to reviewing any recommendations from the SEC’s advisory committee charged with assessing the impact of regulations on smaller companies,” a spokeswoman said, “including the impact of the Oxley legislation.” – 30 – CNS-4-14-06