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ALL BUSINESS: Rolling Back Sarbanes-Oxley Corporate Reform Law Will Hurt Investors

Critics trying to build support for a rollback of corporate reform laws argue that they’re way too costly and have taken all the fun out of doing business in America. Those are lame excuses.

The latest rant comes from Shutterfly Inc. chairman Jim Clark. He said he is leaving the online photo company because the Sarbanes-Oxley law has taken reform “too far” and was crimping his ability to lead the way he wanted.

Next time he reads about another company swept up in the stock-options backdating scandal or hears of increased fraud in foreign financial markets, then maybe he’ll wake up to the benefits of reform.

Sarbanes-Oxley — or Sarbox, as it’s come to be known — was passed in 2002 after scandals that led to the collapse of Enron, WorldCom and others. It has forced companies to rethink how they handle everything from their disclosure of information to shareholders to the independence of their boards.

It’s despised in many corners of corporate America. Those who complain often focus on the time and expense needed to put policies and procedures in place. Of particular hatred is Section 404, which is designed to ensure companies’ books are in order by forcing them to take on the laborious task of reviewing their internal controls.

Yahoo!: ALL BUSINESS: Sarbanes-Oxley Is a Must

Shareholders sued 120 companies for stock fraud this year, according to data compiled by Bloomberg and the Stanford Law School Securities Class Action Clearinghouse, the lowest total since 1996, a year after Congress passed laws to curb securities-fraud litigation.

The decline might have resulted in part from increased corporate governance rules and fraud prosecutions since 2002. That year, there were 267 stock-fraud lawsuits after an accounting scandal forced Enron to file the second-biggest bankruptcy case in U.S. history. Enron’s collapse led to the Sarbanes-Oxley Act, which imposed stricter accounting rules on companies.

Washingtonpost: Stock-Fraud Suits at 10-Year Low

Regulators reportedly proposing changes in rules that businesses argue cost them an average of $3.8 million without improving accounting accuracy.

Businesses that have been complaining about the cost of complying with the Sarbanes-Oxley corporate reporting regulations will get some, but not all, of the relief they’ve been seeking, according to a published report.

The Wall Street Journal reported Friday that federal regulators have said they will propose guidance next month to help companies and auditors interpret one section of the law, passed in the wake of the Enron accounting scandal, in a way likely to save them time and money.

The regulation, known as Section 404, requires companies first review their own systems for ensuring accurate financial reports and then have them tested by outside auditors. The Journal reports that companies have complained the rule requires them to spend many hours and that large companies spent an average of $3.8 million each in fiscal 2005 complying with the rule and documenting things that have nothing to do with the integrity of their financial statements.

CNN Money.com: Business may get Sarbanes-Oxley relief

The top U.S. markets regulator and its top audit industry watchdog will testify to a congressional panel on September 19 about post-Enron Sarbanes-Oxley reforms under attack by much of the business community.The House of Representatives Financial Services Committee on Wednesday said Securities and Exchange Commission Chairman Christopher Cox and Public Company Accounting Oversight Board Chairman Mark Olson will testify at next week’s hearing.

SEC’s Cox to testify on Sarbanes-Oxley progress