Sarbanes-Oxley addressed "what was viewed as inadequate oversight of the audit practice," said Kenneth E. Bentsen Jr., executive vice president in the Washington office of the Securities Industry and Financial Markets Association, a trade group for securities firms, banks, and asset managers. The law was not designed to deal with the issue of excessive risk-taking and bad lending practices, Bentsen said while in Philadelphia last week. He worked on Sarbanes-Oxley when he was a member of the House of Representatives from Texas. Others think it is fair to wonder why Sarbanes-Oxley should not have been capable of doing more to prevent the most recent financial meltdown. Anthony H. Catanach Jr., an associate professor of accounting at Villanova University and the Maguire fellow at American College in Bryn Mawr, said the financial crisis showed that independent auditors were unable to "provide adequate oversight over management's valuations of financial instruments." "How could this happen in our post-Sarbanes-Oxley world?" Catanach asked rhetorically. Is there reason to believe that whatever comes out of Washington's legislative meat grinder is going to be any better? There are many skeptics convinced that, regardless of what Congress does, there will be a next time. A problem for would-be reformers is the constant evolution of businesses as they adapt to a changing economic landscape. It's Darwinian, said Ralph Walkling, executive director of the Center for Corporate Governance in Philadelphia. "Regulation doesn't follow a Darwinian process," Walkling said. It is more like a pendulum that gets stuck, either on the side of too much regulation or too little regulation, he said. Successful regulation would evolve with business, but that will not happen because the political process makes it impossible. Stephen Liedtka, a colleague of Catanach's in the accounting department at Villanova, said the financial world "might just be too complicated to be regulated properly." The best government can do is manage the system's tendency to melt down. "I think you're a fool if you think you can stop it," he said.
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2010 Media Report Villanova School of Business