SOX and the Law of Unintended Consequences

Sarbanes Oxley, Year 4.  The Big 4 cannot hire enough people to administer audit projects, so quality is at record lows, and asininity of compliance rulings is at an all time high.  To paraphrase Jack Nicholson from As Good as it Gets, this is what happens when you start with a normal person and then you take away reason and accountability.  In particular, shame to say, there is absolutely no accountability in the current system for being asinine.  And since nature abhors a vacuum, the staffers in the Big 4 are promulgating absurdities at a record rate.

Understand whom this punishes.  It does little harm to the Fortune 2000 industry incumbents.  For the most part their strategies are governed by inertial forces, and thus they do not need to change their processes often enough or rapidly enough to be crippled by SOX regulation.  Indeed, they arguably are made better by SOX audits in the long run, since they inherit the benefits of these documented reviews once they have been able to wash out all the stupidities.

But woe to the start-ups, and woe to the small business innovators.  Their processes are necessarily in flux.  They need to prototype them, test them, modify them, expand them—in short, they need to do anything but document them to a set of standards administered by children who know nothing of business and even less about the industry in which the company competes.  Encumber these companies with SOX audits, as we have, as we are intending to do even more, and basically you take them out of the game. 

The unintended consequences? Well, consider which set of companies has driven our employment engine over the past decade.  It is not the big guys.  They are still laying off people in their effort to focus on core and outsource their context.  Rather it has been the small to medium businesses that have driven all the job growth, and those are the very ones SOX is bringing to their knees.