Political SOX

For those at the right age, the high-profile financial scandals at the turn of the millennia will not have been easily forgotten. Names such as Enron, Worldcom and Tyco bring back images of corporate smoke-and-mirrors, of investors being tricked into believing false financial information, and of millions of dollars being lost due to corporate malfeasance, fraud and deception.

The Sarbanes-Oxley Act of 2002 or SOX was a firm, if complicated and cumbersome response to that scandal.

Short of going over the entire book on its whys and wherefores, we can characterize SOX as the regulatory response to put a stop to corporate financial dishonesty. From that day onwards in 2002, companies were required to tell only the whole truth as far as its financial performance was concerned, attest to having the necessary systems and controls to ensure that it is telling the truth, and make all top officers accountable, in the event that they should not tell the truth. In sum, investors have had enough, so they were able to draw a line in the sand, and declare that from thence, nothing by way of lies would ever come out of the corporate community again.

In 2016/2017, the world was treated to the bizarre spectacle of the American democratic process doing an ENRON, a WorldCom and a Tyco all rolled into one. The lines between what are facts and what are mere hearsay and conjecture became very blurred indeed. So blurred that “post-truth” was picked as the word of the year for 2016, and in 2017, the expression “alternative facts” also found its way into the political lexicon.

What does all this mean in simple terms? Well, it means that if someone, or a group, or indeed any party does not like the cold-truth, he, she or they could just simply invent a version of the truth to suit their liking.

Take, for instance, the issue of crowd size during Donald Trump’s inauguration. Like a spoiled kid who can’t seem to live down the idea that the neighbor’s toy is shinier than his, he promptly threw a tantrum when it was suggested that the crowds that turned up to see him take the oath of office were much sparser than those who came to witness Obama. And he sends his lieutenants to go and proclaim to all who would care to listen (and even those who couldn’t care less) that this was not true. And her trusted alter-ego Kellyanne Conway even promptly coined a term for it – “alternative facts.”

Whoa. Hold on, cowgirl. Not so fast. Do you detect shades of Houston-based Enron here, in this cowgirl’s statement?

Enron presented its financial information in a way that distorted the real picture of its viability. In Conway-speak, “alternative facts.” What happened were large numbers of investors losing their shirts, as the real truth about Enron finally came to light.

So here’s the deal. US presidential administrations are far more important than the Enrons of the world. Literally, the wrong man could end the world in a heartbeat. So should the US not be more vigilant?

Is it high time for a SOX to be enacted in the political arena as well?

The US consumer confidence index slipped to 111.8 in January from a December reading of 113.3, which had been its highest since August 2011. The Conference Board business research group, as quoted by the Associated Press