Principles work better than rules

reprinted with permission
NEIL REYNOLDS

Rembrant_HarmenszOTTAWA — Once you decide that 10 Commandments aren’t enough, where do you stop? You don’t. In excruciating detail, you legislate more and more. You pile rules on rules, 100,000 Commandments, and they’re not enough. You still have criminal conduct. So, you must prosecute and punish everyone.

In its 2005 annual report, FedEx observed that it needed 1,200 staff members, working 100,000 hours, to meet the requirements of a single section of a single law — in this instance, the famous Section 404 of the Sarbanes-Oxley Act. It’s merely one regulatory requirement among thousands imposed by the U.S. government on public corporations. Like most of the rest, it’s unnecessary.

Section 404 requires that chief executive officers list the methods they use to keep their financial officers from stealing shareholder assets and falsifying records to hide the crimes — and then find accountants and lawyers to swear that the list is accurate. (Make sure you name the people who have keys to the executive washrooms.) It’s not obvious why the Eighth Commandment and Ninth Commandments aren’t enough. Alas, for some reason, they are not. Continue reading

Advertisements