High-level government officials are listening, and asking the questions, this week as the campaign by business interests for a softening of the laws and rules laid down amid the 2002 corporate scandals gets a serious hearing.
An array of companies and business leaders have been making the case that the requirements spawned by the crisis of corporate malfeasance are overly onerous and costly -- and hurt the competitiveness of U.S. financial markets by driving some companies away from them.
Treasury Secretary Henry Paulson and Christopher Cox, the chairman of the Securities and Exchange Commission, are acting as moderators for panel discussions at an unusual conference on the issue being convened Tuesday by the Treasury Department. The panelists are a cavalcade of heavyweights: legendary billionaire investor Warren Buffett, General Electric Co. Chairman Jeffrey Immelt, brokerage founder and CEO Charles Schwab, former Federal Reserve Chairman Alan Greenspan and New York Mayor Michael Bloomberg.
Treasury officials say the purpose of the gathering in Washington, with blue-ribbon participants on both sides of the issue, is to begin a discussion that could lead to policy changes.
In November, a high-profile committee of business, legal and academic figures put forward proposals in November to clip back corporate governance rules, class-action lawsuits against companies and auditors, and criminal prosecution of companies by the government.
A second group, formed by the U.S. Chamber of Commerce, is unveiling its report and recommendations Wednesday.
It calls for "quick and decisive adjustments in the U.S. legal and regulatory framework ... to ensure that U.S. investor and business interests are best served in the global marketplace." Among its key recommendations: Public companies should stop issuing quarterly earnings guidance and policymakers should seriously consider proposals to reduce the liability of accounting firms in litigation over company audits.
Some experts, including Lynn Turner, a former SEC chief accountant, have warned against a softening of the rules, saying that would erode investor protection.
And Wall Street powerhouse Goldman Sachs took issue with the business campaign's premise.
"The regulatory climate does matter. ... Nonetheless, we do not think this is the main problem," Goldman Sachs said in a recent research paper. "Instead we see the growth of capital markets outside the U.S. as a natural consequence of economic growth and market maturation elsewhere. The U.S. has in fact been losing market share for several decades."
Paulson, who headed Goldman Sachs before coming into the administration last summer, gave the campaign traction when he said last fall that "the right regulatory balance should marry high standards of integrity and accountability with a strong foundation for innovation, growth and competitiveness."
In December, culminating an intense monthslong lobbying campaign by a passel of companies, the SEC tentatively adopted a plan giving corporate managers more flexibility in assessing the strength of internal financial controls under the Sarbanes-Oxley law.
The internal-controls provision of the sweeping antifraud law, enacted in 2002 at the height of the scandals that engulfed Enron Corp., WorldCom Inc. and other big corporations, is a key target of the business push against regulations. Companies have complained to the SEC that the rules are overly burdensome and costly, especially for smaller businesses.
In the same week that the SEC acted, the Justice Department restricted its prosecutors' ability to crack down on companies that withhold confidential information during criminal fraud investigations, in new guidelines that tempered the aggressive legal tactics authorized after the scandals.
The private-sector Committee on Capital Markets Regulation, which issued its proposals in November, is headed by Glenn Hubbard, the dean of Columbia University's business school and a former economic adviser in the Bush administration, and John L. Thornton, chairman of the Brookings Institution think tank and a former Wall Street executive.
Bloomberg and Sen. Charles Schumer, D-N.Y., released a report in January saying that the burden of tough regulation is contributing to New York City's loss of its competitive edge in the financial services industry to cities like London and Hong Kong. Unless remedies are made, they warned, New York's -- and thereby America's -- leadership in global finance will be eroded, reducing jobs and chilling the U.S. economy.