Critics of Sarbanes-Oxley who’ve been hoping that Congress might tinker with the legislation had their hopes dashed last week by one of the lawmakers who crafted the legislation.

Oxley

Three years after the passage of the landmark Act that bears his name, Rep. Michael Oxley, (R-Ohio), said there’s room for flexibility in the statute, but added that any proposed changes won’t come from Congress. Rather, Oxley said it will fall on the Securities and Exchange Commission and the Public Company Accounting Oversight Board to make adjustments.

“It’s always been my thought that we want smaller companies to be bigger companies so they can employ more people and we can have economic growth, and to the extent that the law complicates that we need to take a look at it,” Oxley said during a panel discussion on the Act in Atlanta last week. “Realistically, that action needs to take place at the SEC and the PCAOB.”

“It has been my experience in the Congress that when Congress passes major legislation, it is quite rare for them to revisit it any time soon,” Oxley said, noting that, “Glass-Stegall was on the books for 70 years and the year after Glass-Stegall passed, Carter Glass introduced a bill to repeal his own Act. It took us 70 years to actually do it. So if somebody is hoping for the Congress to ride to the rescue, you can put that thought aside.”

Oxley, chairman of the House Committee on Financial Services and one of the architects of the legislation that has rocked corporate America, also said he was pleased with the SEC’s recent vote to delay the effective date for Section 404 for smaller companies.

Gnazzo

His remarks came during an Oct. 17 panel, “An Open Discussion on Sarbanes-Oxley With Rep. Michael Oxley,” where he was joined by panelists Tim Bentsen, managing partner of the Atlanta office of KPMG, Patrick Gnazzo, senior vice president of business practices and chief compliance officer of Computer Associates International, Tom Wardell, chair of McKenna Long & Aldridge’s Corporate Department, and moderator Clay Long, founding partner and former co-chairman of ML&A.

When asked about the SEC’s recent 5-0 vote to delay by another year the effective date of Section 404 for smaller companies, Oxley said he gives the SEC a lot of credit. “I suspect that the SEC … was fully cognizant of the cost-benefit ratio with smaller companies,” Oxley said, adding that he was “particularly pleased” with the bipartisan vote. “I think it does portend some potential in the future for some flexibility going forward at the SEC and I think that’s good for everybody.”

The Ohio Congressman also acknowledged that his own legislation may have been too hard on smaller public companies. “It’s a legitimate criticism of the Act, and particularly 404, that it’s a one-size-fits-all solution and obviously what happens to a small, publicly traded company at less than $75 million is far different than General Electric, for example.”

Oxley noted that GE spent $35 million complying with Sarbanes-Oxley, “and they are very happy with what they’ve been able to accomplish under the Act.” But he added, “Obviously they are a far different animal than some of the smaller publicly traded companies. It would be a shame if the law were to force some of these folks to go private and perhaps deny them the access to the capital that they would need in the future.”

“I think that the SEC hopes, and we hope, that there’s enough flexibility in the statute,” Oxley added. “If you read 404, the interpretation of 404 one might say has gone far beyond what the Congress intended. And so within that context, I think there’s some room for the SEC to take a different position.”

However, he did express concern over the potential for backlash against any suggested changes to the law. “I think the big concern that many of us have is that there will be forces out there, in the media and in certain investor groups, that will be ready to jump on anybody who proposes some changes, saying, ‘there they go again, backing off what we tried to accomplish.’ I think that would be unfortunate but probably inevitable,” he noted.