Why expanding Sarbox doesn’t make sense

I’m a little bit late to the game, here, but let me point you to the latest

piece from Thomas Palley, entitled "Expand

Sarbox, Not Shrink It". The idea is that US shareholders need more

protection, not less, and Palley has no fewer than eight reforms which he thinks

should be mandated by the US government, including

  • Require that the CEO and Chairman of the Board be different


  • Stop share buy-backs.
  • Make it obligatory for management to hold vested options

    for a period of three years.

Etc., etc. Talk about a recipe for decimating the public markets altogether.

Hasn’t Palley stopped to wonder what it is that’s driving the private-equity

industry? No one in the world would love these reforms more than Steve

Schwartzman and his like. Corporate governance is all well and good. But

just because something is desirable doesn’t mean it should be mandated. If shareholders

don’t really care about these things (as reflected by the share price), then

why should the government start getting all paternalistic and protective of

them? Let them take the risks, say I.

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