BOSTON—The Sarbanes-Oxley Act is doing more harm than good and must be overhauled, Alan Greenspan told a technology audience here.
"One good thing: Sarbox requires the CEO to certify the financial statement. That's new and that's helpful. Having said that, the rest we could do without. Section 404 is a nightmare." Greenspan's remarks came at a meeting of the Massachusetts Technology Leadership Council here on Sept. 25. Greenspan was Chairman of the Federal Reserve board for 18 years, having retired in early 2006.
He said the evidence is clear that Sarbanes-Oxley strictures are driving initial public stock offerings away from the New York Stock Exchange and to the London Stock Exchange. Increasingly, he said, people recognize that Sarbanes-Oxley must be changed. "The pressure on getting 404 significantly altered is rising and is taking on a critical mass." But he added, "You do not get a bill altered when the two names [Sarbanes and Oxley] are in the process of retiring. People are waiting until they are gone. Then, hopefully, changes will be made. Any bill that passes both houses almost unanimously, cannot be a good piece of legislation."
Greenspan addressed other technology and business issues including the state of the economy. He said the recent tapering off does not indicate a recession. "The American economy is slowing down," he said, noting high inventories and the contraction of the housing market. However, he said the recent decline in gas prices was good news and on balance, a recession is not imminent. "We're not as good as we were in recent years, but the signs of this thing folding just aren't there," he said.
"Globalization is a critical determinant of economic activity. We're no longer a separate economy. Formerly, everything was here. That is not the case today." The single greatest force in the new global economy is China, he said. "China has been moving toward capitalism without ever mentioning that's what they're doing. They've invented euphemisms to describe what they're doing as not capitalism, and they're failing.
Former U.S. Secretary of Labor Robert Reich says globalization is not a threat. Click here to read more.
"The chance of militarism from China is pretty much gone. I think they are down the road to material well-being. Is that a threat to us? By no means. To the extent that they prosper, it will one way or another help us," said Greenspan.
He said that offshore outsourcing is bringing benefits. "I think it is a good thing. You have to ask how we have benefited from opening up of markets in globalization. The evidence is unequivocal. … I don't see any one coming close to us in per capita GDP unless we revert to protectionism."
"The jobs we are losing to China are in obsolescent industries. We ought to be doing what we do best, which is conceptual. …The value of intellectual skills is rising, and the value of manual labor is contracting." Although that trend favors the United States for now, he said our educational system isn't producing enough people at the highest levels.
"The educational system is in deep trouble. I think we've gotten very sloppy in how we're teaching math and science." One remedy would be to open up immigration for high-tech workers, he said. "It is psychologically inconceivable to me that someone who gets a Ph.D. in the United States has the psychology to be a terrorist."
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