The New Yorker recently printed a commentary on Sarbanes-Oxley. While the legislation was viewed by politicians as an important step toward protecting investors from fraud, corporate executives aren’t so impressed.

Corporate executives believe that the high cost of implementing the Sarbanes-Oxley regulations is not justified by the small benefits. The cost of implementation is particularly high for smaller companies, which may discourage them from going public.

The writer goes on to comment about the cost of fraud to investors, noting how fraud can snowball quickly. Companies like Enron and WorldCom were so eager to have investors believe that they were achieving significant growth year after year, that they made bad investment choices and manipulated their financial statements.

It has been suggested that the fraud at WorldCom also negatively affected other companies in the telecom industry. Those companies looked inefficient compared to WorldCom, so they invested in technology and cut expenses in order to compete.

Corporate fraud has a social cost that is often overlooked, says the author.

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