Tuesday, May 16, 2006
Is the Economic “Cure”worse than the Disease?
Stephen Schwarzman is chairman and CEO of the Blackstone Group, one of the largest factors in the private equity industry. His company buys public companies and takes them private again. In a recent interview, he was asked about the Sarbanes-Oxley corporate governance law. He replied that it was very good for his business but it was the worst thing that could happen to the U.S. economy. It has vastly increased the number of public companies desiring to go private in order to escape the costly documentation of accounting and policy procedures the law requires. Even some very large companies are going private. Last November the giant Georgia Pacific company went private in a $21 billion sale to Koch. So the American public is deprived of the opportunity of investing in this Fortune 500 company, thanks to a law that is supposed to protect American investors. The law has also hindered start-up companies from going public and led to many new companies listing their shares overseas, on exchanges in Europe or Hong Kong instead of the New York stock exchange or other U.S. markets. Last year, 23 of the largest 25 initial public offerings by U.S. companies were made in overseas markets.