Greg Mankiw Picks Some Fights

In an interview with CFO Magazine, Greg Mankiw makes some pleasingly frank comments:

On stock options…

On the stock-options issue, were you surprised that expensing was delayed again?
I’m of the view that eventually stock options should be expensed. But to me the issue is not should they be expensed, but how should they be evaluated…. I think the high-tech community has done itself a disservice by fighting the wrong battle — over whether they should expense, rather than over the valuation formula.
So you don’t buy the argument that expensing will hurt the Silicon Valley economy?
What they’re basically arguing against is accurate accounting. When a company says accurate accounting will hurt the company, I say, “Well, if it is, it should.”

On Sarbanes-Oxley:

The other issue CFOs are dealing with is Sarbox compliance. Many argue that the costs exceed the benefits. Do you agree?
A lot of this debate comes down to the role of corporate capital. Corporate capital is in some ways an astonishing institution, built on this idea that shareholders will voluntarily give their money to people they’ve never met and expect those people to protect it and maximize its value and give returns with a profit. What Sarbanes-Oxley tries to do is provide some balance between protecting shareholders and instituting regulations that aren’t so overwhelming that [they deny managers the time to] maximize shareholder value.
I’ve talked to enough CEOs in the past few years to strongly suspect that Sarbanes-Oxley went a bit too far. At some point, [Congress] may want to look back and ask, How do you strike this balance?
A lot of companies are hoping that will happen sooner rather than later.
They should be careful what they wish for. It’s true that Sarbanes-Oxley is far from perfect, but they shouldn’t compare it to what’s ideal; they should compare it to what Congress would do next.


  1. Generally speaking, I am in favor of regulations protecting the investors. I like Reg FD and I like the aim of Sarbanes-Oxley. But where it gets difficult is for smaller companies. Case in point:, a company Paul you are well familiar with. According to Yahoo!Finance, its enterprise value is $45 million. Yet, this tiny company, which is running at near break-even, must spend about $2 millon per year on Sarbox compliance, if my recollection from a recent conference call serves me correctly. For a small company of this size, the cost does seem excessive. There must be a better way to protect investors and allow smaller companies to manage their business without excessive burdens.

  2. A ‘tiny company, running near breakeven’ simply shouldn’t be public…

  3. You suggest companies always wait until they are large and hugely profitable, or just profitable? Who decides how much profit or how huge?
    Wouldn’t it be better to let the “owners” decide when to go public and let the investing public decide the price?
    Seems to me that requiring companies be profitable prior to going public would kill a lot a good start-ups. I think society would be the poorer for it.
    Having a profitability and/or size requirement is not a model that I would favor. It has a big-brother feel to it.
    Instead, I prefer that the investors decide. In my view the real question is, how much disclosure is warranted for smaller companies versus larger Fortune 500 companies?
    In’s specific case, I think investors should be allowed to participate. If I believe the company will continue to grow and prosper, why shouldn’t I be allowed to participate through share ownership? Why should I have to wait years until they are large and profitable. I know the risks of a micro/small cap and will act accordingly.
    As a matter of disclosure, I have done well with TSCM. I bought much lower, sold most but not all higher, and continue to hold some now.

  4. Nice to hear you’ve done well – but a company which is too small to have predictable revenue, profits and a business model isn’t one in which unsophisticated (i.e. public) investors should be investing.
    There’s a way for sophisticated investors (such as yourself) to invest in companies like this – it’s called Venture Capital (or more broadly private equity).
    I believe VERY much in the free market – and in allowing owners to choose their investors. But too many of those owners (Ebbers, Lay/Skilling, et al) spent the mid-to-late ’90’s screwing those investors – and defrauding the ‘public’. It’s a shame but a few bad apples spoiled the whole bunch – and it was and is unrealistic to expect Congress to do nothing. SarBox is certainly not the BEST solution, but the alternatives could have been far worse. Companies at this point should be figuring out how to live with, rather than fight, it.
    And if they’re too small and realize that being public isn’t fun anymore, they can always go private. If TSCM is such a great company, I’m sure there are sophisticated investors out there more than willing to buy the company out of the public market and let them spend their $$$ on building a real business rather than paying consultants and auditors.

  5. Chris, I respectfully disagree.
    As a general statement, I think smaller companies are often much easier to analyze. In most cases, you can readily understand revenue and expenses. Large complex companies become “black boxes” where you really don’t fully appreciate how the company makes its money. Nor do you fully understand all the rest of their financial statements, even if you are a CPA. So I think smaller cap companies offer investors opportunities.
    Let’s review your comments in more detail. Unsophisticated investors should not be investing in smaller companies with unpredictable revenue, profits and business model. Very few companies today of any size have predictable revenue, profits and business model. Everything is changing so quickly, and competition is intense. This is affecting small to large companies. If you have the NY Times or Wall Street Journal, run you finger up and down a few columns of stock prices. It isn’t uncommon to see the 52 week highs and lows differ by as much as 50% or more. This applies to small and large companies.
    Sophisticated investors (such as me) can invest in Venture Capital. I am an avid investor, but not necessarily sophisticated. By sophisticated, I mean managing money on the behalf of others besides relatives. I am not sophisticated. For many people, myself included, venture capital is likely beyond our reach. Beside which, doesn’t need venture capital at this point, and venture capital isn’t interested in because they are unlikely to get the 10-15 times pop that they are looking for.
    We agree that a few miscreants have made a mess of things. And we both know who they are. And we both agree that corrective measures are appropriate. I suspect we both agree in a strong SEC. And I suspect we both applaud NY AG Eliot Spitzer. But where we have a subtle disagreement is in how much oversight is warranted for small companies.
    Let’s assume for a moment that the $2 million expense for Sarbox for (TSCM) is accurate. That’s a huge hit for a company with an enterprise value of only $45 million. So what size would justify $2 million in “oversight fees.” Let’s say Company A earns $10 million per year prior to Sarbox. Company A earning $10 million is worth about $100 million, assuming a cost of capital of about 10%. A $100 million company would spend 20% of its “earnings” on an accounting oversight. That’s grossly excessive. If the company earned $50 million per year with a value of about $500 million, then it would be spending about 4% on oversight. That still seems a high percentage to me. But a half billion dollar company is no longer a small company. That’s a meaningful and significant size. And I suspect that as the size increases, so does the cost of Sarbox (on an absolute basis), so it would likely be more than $2 million. The point I am driving at here is that for Sarbox to be a “manageable and reasonable number,” the company would to be fairly large–beyond a half billion. Many VCs would have exited the scene long ago by the time the company reaches a half billion in value.
    Your last point is that if the costs are prohibitive, then they can always go private. Yes, and many companies are doing just that. But I think that is unfortunate. It is unfortunate because their access to capital is now more difficult and more expensive. You always pay a premium for a lack of liquidity. It is unfortunate that you and I can’t participate in those companies that have decided to go private.
    I don’t we disagree on principle, but rather one of appropriate measure. We both agree that safeguards need to be put in place to protect investors, within reason. For smaller companies, the current Sarbox is a huge challenge. I was much more in your camp until I listened to the TSCM conference call. Then, I thought, “this is absolutely nuts.” TSCM’s business is pretty simple. You get subscriptions, you pay staff and overhead, and you have some technical gizmos to deliver the content. So why does a small company need to pay $2 million over and above its “normal” internal accounting costs? Those costs seem out of line and extreme to me. But I suspect that TSCM simply has no alternative–they simply must pay. Something somewhere is broken.

  6. You’re right – on principle we do agree – and it’s mostly a question of measure. I’d love to see the free market rule, but it only takes a few Bernie Ebbers (in his case, perhaps it takes just one) to spoil it for everyone.
    I’m absolutely in favor of a strong SEC, and strong penalties for securities fraud. I’m definitely NOT a Spitzer fan, however – to me he’s the worst kind of politician – bending the law (or ignoring it) to forward his personal agenda and career.
    But back to SarbOx. No one is mandating that companies spend any sum of money – what Congress is mandating is accountability. Yes, they’re doing so in a very heavy-handed fashion (with Congress, there’s no other way), and SarbOx is basically a ‘flat tax’ which comes down hardest on the smallest companies. Fair? No. But (unfortunately) necessary – at least until someone comes up with a better plan – and one with teeth.
    In the words of Ronald Reagan – trust…but verify.

  7. Kevin, nothing in your comments suggest how investors in smaller companies can authenticate the financials without mechanisms like SarbOx–the ability of investors to analyze published results is completely irrelevant to this discussion. Politically, adding to staff at the SEC and state AG offices will never happen, so we cannot rely on them to monitor the entire universe of public companies, and with the readily available tech today fraud is easier to perpetrate.

  8. In today’s Barron’s Online article (href=” “What’s Next” (subscription required), we note the following in an interview with Mario Gabelli.
    Gabelli: I can’t believe Arthur Shorin [Topps’ chairman and CEO] would want to stay public under Sarbanes-Oxley regulations, unless the rules are changed.
    Barron’s: Is there any chance that will happen under a new head of the SEC?
    Gabelli: The basic intent of Sarbanes-Oxley was sound — to restore confidence in corporate finances. The problem is the one-size-fits-all implementation. Large corporations have significant staff to devote to meeting regulatory requirements. Smaller companies don’t. For these companies, I think the government will stagger implementation of Section 404 [the most onerous section of the Sarbanes-Oxley Act of 2002 that holds management responsible for internal financial-reporting controls]. Sarbanes-Oxley has had many unintended consequences. By discouraging small companies from coming public, it is compressing venture capitalists’ returns. Down the road, that will make it harder for new companies to raise capital.

    So here we have a solid company Topps with a market capitilization of about $400 effectively forced to go private. Moreover, we are going to discourage small companies from going public and compressing venture capitalists’ returns. Effectively, we are going to raise the cost of capital and thus discourage new companies. That ain’t a good thing.
    To address your point BillSayThis, I compleley disagree with your entire set of assertions. First, companies were prior to and still remain responsible for their financial statements. To knowingly falsify your financial statements is fraud. All Sarbox does for smaller companies is increase the costs and force them to go private. Second you state, “…with readily avaialable technology today fraud is easier to perpetuate.” I disagree. Technology is on my side too, very much so. Today I can, with a few keystrokes, pull up all the company’s entire set of press releases and financials. Ten years ago, that was not the case. Shysters favorite weapon is promotion. But with the ability to quickly review a company’s “story,” I can all ferret out the miscreants a lot easier than the past. Small caps are even easier to figure out because they are so simple as companies. It is the larger companies that were and are more difficult to analyze. And third, I don’t believe I advocated adding more staff to the SEC or AG offices is the answer.
    Ultimately, the responsibility lies with you the investor. It is your duty to do thorougly research the companies you are buying. You must remember, when you go into the equities market, you are accepting risk. You are not buying Treasuries. If you have neither the skills, time, nor patience to thoroughly research your stocks, then don’t buy. Hand your money over to a mutual fund or set of mutual fund managers. Let them do your homework for you.
    While I support Sarbox for larger companies, I believe its costs are too great for smaller companies. Sarbox should be modified in order that smaller companies are not faced with an undue reporting burden.

  9. Are you saying that SarbOx doesn’t make fraud more difficult to keep secret? I want to be clear, I’m not suggesting that the law is perfect and shouldn’t be revised. But I do believe that most people, who aren’t full time investors, don’t have the time to examine companies as closely as you recommend and so need to rely more on easily accessible information.
    So laws like this one seem to me to improve the odds that the information is less likely to be misleading. I would also suggest that hucksters, the better ones at least, will realize that their words are more available to people such as yourself and keep that in mind if they decide to try and subvert the system in spite of the increased regulation and scrutiny.

  10. I suspect Sarbox makes fraud more difficult, if only because the change it has had on the accounting profession. No longer are your auditors your advisers and gatekeepers. Auditors are now being held accountable, more so than in the past. So their level of diligence has increased. I believe the accounting profession has been giving a huge wake-up call. But I still argue the burden of Sarbox on smaller companies is excessive, and the cure is worse than the disease. Simply put, if there are no longer smaller companies because they can’t afford the compliance, then, yes, we have achieved nirvana in terms of investor protection, but at what cost?
    As far as dedicating huge amounts of time to studying companies, I don’t believe that is necessary either. For smaller companies, you can come up to speed quickly. You can often call the company and speak to others besides the investor relations department. While they are forbidden to say to give material, non-public information, they are often quite willing to discuss the company at length. And you can discuss with them information that you have reviewed through various filings and press releases. You can judge yourself fairly quickly as to the company’s legitimacy and honesty. And you can with a few phone calls check their suppliers and customers. Effectively, you can do perform a quick Porter analysis (supplier, buyers, substitution, new entrants, and internal rivalry). Very soon you have an excellent snapshot of the company, especially in today’s environment where Wall Street research has been cut back substantially. You have an opportunity to ferret out companies that have potential.
    Is the above method full-proof? Of course not, especially to newer investors. But remember to have a diversified portfolio so that you can survive a few bullets periodically. It happens, even with perfectly legitimate, honest, caring companies.
    My basic argument throughout this thread is that a) yes, I agree that Sarbox is helpful to policing larger companies, and b) Sarbox needs to be modified so that smaller companies can still operate in this environment without the need to go private because of excessive compliance costs. I reject the notion that smaller companies ought to remain private until they are sufficiently large and profitable.

  11. Sarbox Debate

    I am having a discussion in the comment section of Greg Mankiw Picks Some Fights in Paul Kedrosky’s weblog Infectious Greed concerning Sarbanes-Oxley. For those interested, you might wish to follow along, or even better yet, participate. Infectious Gre…

  12. If I may interject a comment from a guy currently working (at his day job) in the IT trenches about SOX?
    It forces us to do best practices that any good IT shop has already been doing.
    It costs far too much – not the best practices but the reporting on such. Compliance reporting costs my group 45 minutes per server. This is a full time employee for my group. This might be abosrbed in a larger company with no problem. We’re not a large company – we have problems finding the money for the FTE.
    It costs too much in transaction costs. We’ve delayed buying new software, new equipment, installing new systems becuase “We’ve got to be SOX compliant by xx”.
    I am not an investor – but I do work for a startup. I’ve got my startup IT shop nearly up to SOX standards – but I’m really dreading what happens when I have to start reporting on such.

  13. Re: the costs of Sarbox… don’t believe everything you read.
    First of all, because of the new law – companies are taking in some startup costs – paying for consultants to *establish* the controls that did not exist. TSCM probably does not have $2MM in ongoing annual Sarbox costs. If they do – then they are not really good at institutionalizing procedures – in which case, you should question the investment *anyway*.
    The positive effect of having good financial controls will far, far, outweigh the initial investment in getting to compliance in the short term.

  14. :::TSCM probably does not have $2MM in ongoing annual Sarbox costs. If they do – then they are not really good at institutionalizing procedures – in which case, you should question the investment *anyway*.:::
    Wrong and wrong. Their costs are two million and they are not going away. I believe it was Rocker on the conference call who asked that very question. And yes, they are doing what they can to minimize costs on an on-going basis. I don’t think you’d want Cramer breathing down your neck. It’s not like he has never fired a person before in his life.
    Let’s take another example: Let’s go to the “Sizing Up Small Caps” in this weeks Barron’s. They mention an interesting small cap called “Molecular Devices.” You can get a quick snapshot of Molecular Devices by going to Yahoo!’s website here: .
    The company has an enterprise value of about $320 million. So now let’s look at what they say about their Sarbox costs. I use (modest subscription based), but you can use (free) if you choose. (I like using 10KWizard because I can quickly search on names of individuals, or key words, or whatever I desire. It’s great for investigating stocks.)
    In their most recent 10Q statement (05/04/2005):
    “SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expenses in the first quarter of 2005 increased by 31% to $14.3 million from $10.9 million in the first quarter of 2004. The increase was primarily due to $1.4 million of additional salary, benefits and other expenses associated with increased headcount, largely driven by the acquisition of Axon in the third quarter of 2004, $800,000 in increased accounting and consulting fees associated with Sarbanes-Oxley Section 404 compliance, and $400,000 of increased amortization due to acquired intangible assets.”
    Increased from what? Well, let’s look at their latest 10K statement (03/16/2005):
    “SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expenses in 2004 increased by 21% to $52.5 million from $43.5 million in 2003. This increase was due to $4.1 million of salary and related expenses due to increased sales headcount worldwide; $3.4 million of salary, benefits, facility and other expenses of the acquired Axon selling, general and administrative activities; $1.5 million of costs associated with Sarbanes-Oxley Section 404 compliance; and increased amortization of $800,000 for the intangible assets acquired from Axon. These increases were offset by an $800,000 decrease in service and warranty costs.”
    Just another random example of where $2.0 million for a small cap company does not seem out of the normal range. Granted, from these quotes alone we don’t know if these are one time costs or on-going costs.
    Are you sure SourAron that TSCM investment should be questioned? Or is that just a guess? I ask that question because I know that TSCM management is doing everything within their power to minimize their cost structure and to become profitable. And I did listen to the conference call when that very question of whether the costs were one-time or on-going was asked and answered.

  15. SourAron “If they do – then they are not really good at institutionalizing procedures – in which case, you should question the investment *anyway*.”
    Possibly. Maybe. What are they spending the money on might be the question to ask. Most of our ongoing costs wrt SOX are inescapable salary costs that cannot go away regardless of how good the procedures are. From an IT perspective SOX requires compliance reporting and monitoring; real servers, real applications, real man hours.
    This stuff does not happen on it’s own.

  16. I can’t speak to TSCM directly, Kevin. I have not listened on the conf calls, so I will concede points about that particular company to you.
    That said, it is not all that uncommon in companies, since this law came out, to “hide the bodies” when a project fails into the Sarbox compliance “black hole”. Particularly since any given IT project these days has some component that is arguably Sarbox related. It has become a joke in the IT community in the last couple years that – if you want to justify an unjustifyable project, just say that you need it for Sarbox compliance, and it will probably get approval based on fear alone.
    Not to mention, inflating the Sarbox cost numbers helps the execs make a case for eliminating a law that, quite correctly, makes execs personally accountable. Frankly, I see Sarbox making all the right people angry and scared… this is not a bad thing for investors.

  17. SourAaron, I find those that support Sarbox, even for smaller companies, appear to be saying something along these lines, “There were a few miscreants that treated investors badly and we want to ensure that it is much more difficult to treat investors badly in the future.” On the face of it, it sounds okay.
    Let step back for a second and review. Today we note from WSJ Online story “Adelphia’s John Rigas Gets 15 Years” that, “Adelphia Communications Corp.’s 80-year-old founder John Rigas was sentenced to 15 years in prison for fraud and conspiracy, marking the first effective life sentence in the wave of high-profile corporate-fraud cases scheduled for sentencing this summer.” That’s a rather ignominious way to spend one final years dancing on this tiny planet, no? If that doesn’t give the rich and powerful pause, I don’t know what will. And all this was prior to Sarbox. My point being is that you don’t need Sarbox to make the bad people pay a very heavy price.
    Now, let’s look at some of the issues that have been raised in this thread. One is that if the company isn’t large and profitable, it shouldn’t be public. I don’t support that statement whatsoever. Again, go back to the previously mentioned company Molecular Devices. Quoting from this week’s Barron’s magazine, “Sunnyvale, Calif.-based Molecular Devices is just such a gem. The company is a maker of high-performance bioanalytical measurement systems that help speed up the discovery of new drugs and improve life-science research in laboratories around the world.” Molecular Devices certainly seems to be benefiting society and the world at large. But is it large and profitable? It sports an enterprise value of about $320 million and has annual net income of about $18 million. If we accept $2 million per year for Sarbox compliance, then it is spending over 10% of it net income on compliance, an excessive amount in my view. Rather than spending precious resources on research and development, it is spending its precious resources on lawyers and accountants.
    Another comment is that Sarbox is just a blanket excuse where everyone throws their pet projects to get funding. For smaller companies, that’s just plain silly. Small companies want to boost their earnings so that they can boost their share price so that they can raise more capital more efficiently as well as allow the executives to make a lot of money on their share options. The very last thing an executive wants to tell the street is, “Yeah, we know our earnings took a hit from Sarbox complaince and our costs may stay at this elevated level.” For larger companies, Sarbox compliance as a percentage of their earnings is probably not a big deal, but for smaller companies, it is a big deal.
    Another comment is that well, you know, it is usually the fat cats that take advantage of us smaller people, so Sarbanes will scare the living daylights out of them and keep them angry, scared, and honest. I don’t know about you, but the threat of a 15 year jail sentence would do plenty to keep me honest. In many smaller companies, the employees and executives have a substantial portion of their net worth in the company. They are very focused on doing what is right for both the shareholder and themselves, for they are the shareholders. Sure, there are some bad apples. But I don’t believe that having excessive regulations is the answer.
    Effectively, I see those that support Sarbox as saying, “We need to be protected, Sarbox protects us, and in the long run it will be good for us.” My question is, how do you know? How do you know that you haven’t been too heavy handed? How do you know you haven’t stifled entrepreneurialism and creativity? How do you know how many biotech companies won’t be started? Or how many new jobs have been lost? Or how the country’s competitiveness has been hurt? Or the price that society has paid? You simply don’t know.
    My argument is, yes, I agree for larger companies, where the cost of compliance is not a significant burden to the company, Sarbox should go forward as it currently stands. But for a smaller company, where the cost of compliance often exceeds 5%+ of the company’s earnings, some other solution should be found. I am basing my objection on the costs of Sarbox for smaller companies. At some point, the cost of prevention becomes too onerous.
    Smaller companies are spending an inordinate amount of resources satisfying government regulations and not on creating value.
    All I have been saying throughout this thread is to make sure that the corrective measures are appropriate and measured responses. Perhaps two different flavors of Sarbox are required so that smaller companies can still provide additional assurances beyond what they have in the past but at a much reduced cost from the full-blown Sarbox that larger companies must comply with. By having auditors separate from advisers and having auditors more accountable for the statements, I suspect that many of the prior challenges have already been addressed.
    While I reserve the right to re-enter this discussion, I am going to refrain from commenting further unless something new and substantive is raised.

  18. Just a quick message, head over to Jeff Matthews’ blog ” Jeff Matthews Is Not Making This Up” found here:
    Now look at his concluding comments from today’s post.
    :::Yet even today, in a Sarbanes-Oxley world brought about thanks to people like Dennis and Mark, there are companies as egregious in their spin-doctoring and as opaque in their accounting as Tyco ever was—and they are being touted by Wall Street’s Finest, who don’t seem to bother asking themselves when, exactly, does “spin” become “lying.”:::
    For those that don’t know, Jeff Matthews is a hedge fund manager. So for all your expensive Sarbox costs, Jeff Matthews has effectively told you, you can’t blindly trust the numbers. So what does Sarbox really buy you, besides a greater burden on smaller companies?

  19. This is rapidly becoming a circular conversation. Matthews point is spot on – you CAN’T blindly trust the numbers. What good does it do to be able to ‘analyze’ lies and fraudulent figures – regardless of how much time and experience you have?
    So for that reason, the only thing you CAN do is to force executives and board members to stand behind their statements – and accept personal liability for them. THAT’s why SarbOx was implemented – not to dictate that TSCM spend $2M/year.
    I fully agree it’s a shame that Congress implemented this law in such a heavy-handed (and fundamentally unfair) manner – but it’s silly to expect that Congress was going to stand by and allow more Worldcom/Enron/Adelphia situations.
    Locking up criminals like Kozlowski, Ebbers & Rigas (whose sob stories about their charitable givings – whose money was it that they gave away? – and failing health should fall on deaf ears) for a good long time should discourage others from pursuing the same path. Unfortunately guys like Scrushy and Key Lay are still walking the streets – with SarbOx it becomes that much easier to nail them in the future.
    And last but not least, after all of this I still don’t feel sorry for TSCM – or for Cramer. That this sad excuse for a business ever managed to go public in the first place is an unfortunate result of the late ’90’s bubble. If I were them these days, I’d be thankful for SarbOx – $2M/year doesn’t look so bad when compared to $5B strike suits (see

  20. Chris,
    I just want to make sure I understand your point completely.
    So $2 million is fine for small companies to pay for Sarbox compliance, even if they are biotech companies such as Molecular Devices? Even if it raises their cost of capital substantially? If even companies are misdirecting their precious resources away from research and development toward accountants and lawyers to comply with Sarbox? Even if it stops small company formation?
    As far as your reference goes (securities.stanford…), I note that the article dates back to June 2003, nearly two years ago. Yet has not been sued relating to this matter. So that seems like a specious argument to me.
    And if Sarbox were so successful, why is Matthews still finding companies with “…opaque in their accounting as Tyco ever was…”?

  21. No, $2 million is definitely not fine, but since we don’t live in a utopian society where CEOs can be trusted to tell the truth, we need a legal framework to go after the worst offenders.
    I find it highly offensive that we need a law like SarbOx – but in my view we DO need it. I sincerely hope the law soon gets amended to rectify the very valid issues you raise. I also know a lot of honest CEOs, board members and other business executives (i.e. the vast majority) who are rightfully offended by the ‘guilty until proven innocent’ nature of the law.
    But the alternatives are far worse – I’d rather have SarbOx and a strong SEC (not necessarily in that order) than have Bill Lerach and Eliot Spitzer ‘defending’ the public. Regarding my reference to the strike suit, the lawyers went after the bankers for the same reason Willie Sutton did – that’s where the money is.
    Lastly, the argument on TSCM is not about the law – it’s company specific. In my view, going public with minimal revenue and a business model based on future hopes is fundamentally stupid and invites trouble – but the ’90’s bubble allowed many companies (including TSCM) to do just that. My point (from my earliest comment on this string) about VCs is that they are in business to value these types of companies – but the general public absolutely isn’t.
    I still don’t see any value in TSCM (if not for all the $$$ they raised in that IPO, they’d be long-dead by now), but we certainly don’t need to agree on that. That’s why you bought the stock and I sold it. Perhaps you bought my shares – if so I hope you make out better than I did.
    Peace indeed!