A pair of lawmakers who led the fight to approve a major corporate-responsibility initiative said yesterday that the law should be given more time to work before Congress decides whether to tinker with its sometimes controversial and costly provisions.
Making a rare joint appearance at a Washington meeting of corporate lawyers, Sen. Paul S. Sarbanes (D-Md.) and Rep. Michael G. Oxley (R-Ohio) said the 2002 law that bears their names mostly has worked as intended, to crack down on financial abuses that hurt investors.
 
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The law created a tough, new oversight panel for auditors, increased criminal penalties for document tampering, gave corporate board members heightened responsibility and barred companies from making loans to their top executives.
Business groups have been complaining that parts of the law are too expensive and unwieldy, pointing to language that requires executives to vouch for the accuracy of financial controls at their companies. Surveys indicate those efforts could cost more than $5 million at a large publicly traded firm. The U.S. Chamber of Commerce and the Financial Services Roundtable are calling on Congress to make what they say are technical changes to the Sarbanes-Oxley Act.
But Sarbanes sought to remind the audience yesterday of how failures at Enron Corp. and WorldCom Inc. seriously damaged investor confidence.
"In retrospect, some now are downplaying the financial crisis the markets suffered," Sarbanes said.
He warned that the public should not fall victim to "collective amnesia" about "a systemic breakdown" in the recent past.
For his part, Oxley pointed out that disclosures about accounting irregularities persist. Restatements of company financial reports peaked at 414 last year, he said, an indication that the new law is ferreting out problems. Oxley also cited fiscal mistakes uncovered by regulators that will result in Washington mortgage giant Fannie Mae restating earnings by more than $9 billion.
"Just two months ago, earnings smoothing was confirmed at Fannie Mae," Oxley said. "This should be sobering news for those who think Sarbanes-Oxley is no longer needed." Earnings smoothing refers to a practice of shifting costs and revenue to produce the appearance of steady growth.
Still, both lawmakers encouraged regulators to be flexible and open-minded about difficulties companies encounter in following the new law. The Securities and Exchange Commission, for instance, will hold a public meeting next month to hear complaints about the financial-control rules. The agency already has granted small public companies and foreign companies whose stock trades on U.S. exchanges a one-year delay in complying with the rules.
"We need, I think, now to continue moving forward, locking these concepts in place, getting the gatekeepers to keep doing their job," Sarbanes said.
Oxley quickly agreed, telling the audience there is no need for lawmakers to "meddle" at this point.
"We know the costs are real, but let's remember this is also an investment for the future," Oxley said. "How can you measure the value of . . . no more overnight bankruptcies with employees and retirees left holding the bag?"
