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Missing Link: Does Sarbanes-Oxley Curb Investment?

Missing Link: Does Sarbanes-Oxley Curb Investment?

by Rick Turoczy on August 1, 2006

The Sarbanes-Oxley Act has plenty of critics among companies and their advocates as a case of regulatory overkill. At the Federal Reserve, it’s also under scrutiny, as a possible damper on the economy.

Fed Governor Kevin Warsh devoted his first speech since joining the central bank in February to exploring why companies have built up such large cash hoards rather than spend it on new factories and equipment. One cause, he said, was the legislative response to the corporate scandals of 2001-2002.

“Clearly, Sarbanes-Oxley compliance costs have been substantial, diverting funds and, probably even more importantly, some of the attention of chief executive officers and boards of directors from capital spending and R&D; plans,” Warsh said. “Every meeting that board members and executives spend focused predominantly on compliance issues is, by definition, meeting time generally not being spent on big strategic questions.”

Missing Link: Does Sarbanes-Oxley Curb Investment?

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