https://francinemckenna.com/wp-content/francine-mckenna.png 0 0 Francine https://francinemckenna.com/wp-content/francine-mckenna.png Francine2008-01-25 14:03:002010-01-18 23:17:54The GAO Report and Stoneridge – My Audacious Hope
“Hope is not blind optimism.” Pause.
“Hope is not sitting on the sidelines or shirking from a fight.” Pause.
“Hope is that thing inside of us that insists, despite all the evidence to the contrary, that there is something greater inside of us.”
It’s no secret that my hope for the Stoneridge decision was related specifically to the potential for the Big 4 to be held responsible for their contribution to the failures of so many of our corporations and to the scandals and malaise that are now negatively affecting the global economy.
It was not to be.
Maybe the narrow reading of the law was appropriate. The Harvard Corporate Governance blog, via J. Robert Brown of the Race to the Bottom blog, explains it for non-lawyers like me. But Brown shares my disappointment with what he sees as the “legislative” versus judicial tone of the Court in restricting private causes of action under Rule 10(b) and 10b-5. Maybe the plaintiffs’ bar does need to go back to their desks and get better at explaining why actors such as the auditors should be responsible. They need to get better at making the direct link between the auditor’s actions or inaction and someone’s reliance on them to their detriment.
And then there was my hope for the GAO report. I’ll be honest, I had forgotten they were working on it. But when I saw that it was published, I assumed that it would come to the obvious conclusions and start the process of finding a solution. How much money was spent with no value received, supposedly with the objective of advising Congress on such an important issue as the concentration of the Big 4 with regard to audits of public companies and its consequences for fees, choice, and quality of information available to investors? In the end, the lack of any recommendation for action in the face of so much evidence to the contrary was a major cop-out. I know others think we should cut Walker some slack. But I disagree on this point. If not our government agencies and departments that are charged to advise Congress and act as a monitors, then who?
So, the Supreme Court says 10(b) and 10b-5 can not, in most cases, protect investors from the auditors when they do not do their job. And the GAO says that since they do not know how to solve the problem of concentration in the provision of audit services, they will not make any recommendations or acknowledge the real impact of concentration in any detail. The PCAOB is taking only small bites out of the firms, as they lack the teeth to be a true watchdog.
Who is competent, objective, independent, and non-self-serving enough, with sufficient credibility and stature to drive the dialogue?
Curse me, spit on me and condemn me.