September/October 2008 / Governance
A Seasoned Lawyer’s View of Regulation
The corporate lawyer and former outside counsel for the American Institute of Certified Public Accountants takes the long view of federal regulation of hte accounting industry. He notes that accountants tried to maintain the independence of their profession, but that Sarbanes-Oxley completed a process of increasing regulation that began in the 1970s, making only sporadic headway until Enron and other scandals swept aside all opposition. He’s seen a decades-long transformation of corporate law during his career, which he characterizes as “federalization.” State laws, he observes, used to regulate matters such as mergers, acquisitions and governance. He recalls an early effort by the SEC to require that all corporations have audit committees. The ABA issued an opinion that the feds didn’t have the power to issue such a mandate. Rather than dispute the point, the SEC asked the stock exchange to make it a listing requirement.
Bialkin defends the management of earnings as an accounting technique that can be used properly or abused. He says the accounting industry could use more competition, and calls “mark-to-market” the most severe burden financial institutions are facing during the present liquidity crisis.
