Mismatching SOX

This is a guest column from Jeffrey Sonnenfeld, the associate dean of the Yale School of Management and founder of its Chief Executive Leadership Institute in Atlanta. He also sits on the board of directors of TheStreet.com, the publisher of this Web site.

Last week's star-studded CEO forum in Washington on the vitality of U.S. capital markets was the planned follow-up to a chorus of regulatory gripes over the past few months by Treasury Secretary Henry Paulson, who hosted the event, former Fed chief Alan Greenspan, New York City Mayor Michael Bloomberg, New York Sen. Charles Schumer, the U.S. Chamber of Commerce and McKinsey & Co., as well as a conservative panel of academics and industrialists.

Many CEOs' concerns about short-termism and excessive, hostile scrutiny are appropriate. But the Sarbanes-Oxley (SOX) finger-pointing by such luminaries reveals major inaccuracies and inconsistencies that hurt their mission.

Business leaders' complaints over regulation are nothing new. A century ago, AT&T creator Theodore Vail found that favorable regulation could curtail "destructive competition," but J.P. Morgan complained, "Well, I don't know as I want a lawyer to tell me what I cannot do. I hire him to tell how to do what I want to do."

At last week's gathering, his successor at JPMorgan Chase, Jamie Dimon, said, "A book written about the rise and fall of America would reveal that the fall will be because of the legal system."

Nonetheless, such opinion leaders as Dimon, financier Warren Buffett and General Electric(GE) CEO Jeffrey Immelt, while suggesting some thoughtful reviews of the current complexity, resisted ideological rants on how SOX has led to crumbling U.S. capital.