The bill went by the name Sarbanes-Oxley, a more euphonic but less telling moniker than the formal “Public Company Accounting Reform and Investor Protection Act of 2002” or the original and even more descriptive “Corporate and Auditing Accountability, Responsibility, and Transparency Act.”

     In that professionals cannot resist the urge to reduce everything within their respective worlds to acronym, we will henceforth refer to the bill the way they do as “SOX,” a friendlier shorthand than the alternative, “Sarbox,” which sounds too much like a coffee shop in any case.

     In the way of background, Representative Michael Oxley, an Ohio Republican, had introduced a bill in the House in April 2002 as a response to the very public implosion of Enron. Although he met some resistance, the bill passed by a vote of 334 to 90.

     At roughly the same time, the chairman of the Senate banking committee, Paul Sarbanes, a Democrat from Maryland, with the support of the president and the SEC, was preparing to introduce a comparable bill in the Senate.

On June 18, 2002, the Sarbanes bill passed out of committee by a vote of 17 to 4.

     But a not so funny thing happened on the way to the bill’s ultimate passage. A week after the bill cleared the Senate committee, onetime Sprint suitor, WorldCom, suffered its own very public meltdown. Specifically, the company revealed it had overstated its earnings somewhere north of $7 billion during the last five quarters through some highly creative accounting.

     Now, driven by a drum-beating media, Congress went after these corporate culprits with the kind of vigor it showed Japan on December 8, 1941. Sarbanes chose the very same day of the WorldCom announcement to introduce his bill to the full Senate. It passed 97-0 in a relative heartbeat.

     When the bill went to conference, the newly inspired conferees strengthened the prescriptions of the merged bill and added new ones. On July 24, 2002, the bill passed out of conference, newly christened Sarbanes-Oxley 2002. On July 25, 2002, both houses of Congress took up the bill without amendment and without likely being read by anyone but a few committed staffers.

     The bill passed the Senate 99-0 and the House 423-3. Not surprisingly, constitutionalist Republican presidential candidate Ron Paul was one of the three dissenters. He was joined by Republicans Jeff Flake of Arizona and Mac Collins of Georgia. The president signed the bill within days.

     As the old saying goes, marry in haste; repent at leisure. Critics would say much the same of SOX. Surely, the bill deserved more deliberation than it got. Although well intentioned, its effects were far reaching, unsettling, and more than a little unfair, especially to smaller public companies less able to bear additional regulatory burden in a recessionary economy.

     Among its many provisions were the following: the creation of the Public Company Accounting Oversight Board, (shortened to the unlovely PCAOB); mandatory evaluations of internal controls; independent audit committees to oversee the controls; certification of financial reports by CEOs and CFOs; auditor independence; a ban on most personal loans to executive officers or directors; as well as a host of harsher criminal and civil penalties for errant executives.

     Critics would accuse the bill’s framers of retributive justice: that is, punishing a whole community for the sins of a few. The bill’s most problematic piece is the semi-notorious Section 404, the part that mandates management and external auditor review of the company’s internal control over financial reporting. This has proved to be the most expensive and time-consuming element of the bill.

     SOX 404, as it is commonly known, has had a particularly serious impact on smaller companies, as is often the case with regulation. Indeed, less scrupulous execs from larger corporations see a silver lining in the disproportionate burden that regulation imposes on their smaller competitors.

     In the case of SOX, a 2004 study showed companies with revenues above $5 billion spending .06 percent of revenue on compliance, while companies with revenues below $100 million were spending proportionately 40 times more at 2.55 percent of revenue. To be fair, the Senate and the SEC are aware of the disparity and are in the process of addressing it.

     There is some legitimate worry, as well, that fewer companies are choosing to list on American exchanges because of the rigors of SOX and that other companies are choosing not to go public for the same reason.

Defenders of SOX, however, have a case to make. In the Industry Outlook that accompanies this piece, the participating accountants and consultants do a good job evaluating the costs and benefits from the ground level.

     If there is a macro benefit to the passage of Sarbanes-Oxley, it lies in the fact that America’s economic dominance hinges on the credibility of its capital markets. Foreign investment flows here because of the security of those investments. SOX may lessen the return on investment in a small way, but it greatly enhances confidence that there will be a return.

     The CEO of the New York Stock Exchange, John Thain, speaks for many in the corporate community when he concedes, “There is no ques-tion that, broadly speaking, Sarbanes- Oxley was necessary.”

     There is considerably more questions, however, and a good deal of ongoing debate, as to whether the

SOX we got was the SOX we wanted or needed. Only time will answer that.