Daily Archives: May 7, 2007

The court of investor opinion

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soxdummy.jpgAlex Pollock has an interesting idea to help decide the debate over the true effects of the Sarbanes-Oxley Act on the U.S. securities markets:

[I]f Sarbanes-Oxley 404 were voluntary, would investors differentiate among American companies and pay a premium for the securities of those companies which implemented it, compared to those which chose not to? . . .
In this context, we can say there are two competing theories:
A. Sarbanes-Oxley is bad for investors because the costs are excessive relative to the benefits, and
B. Sarbanes-Oxley is good for investors because it protects them and makes them willing to pay more for securities.
Theory B is usually used as an argument for keeping Sarbanes-Oxley Section 404 mandatory, but it is actually a great argument for making it voluntary.
Under a voluntary regime, if Theory B is right and investors love how they are protected by Sarbanes-Oxley 404, they will bid up the prices of the securities issued by companies who implement it. We will then observe within the U.S. market a premium analogous to the ìcross listingî premium, and everyone will end up following suit.
But if, as many of us believe more likely, investors think their money is better spent on research and development or marketing than on excessive accounting routines, paperwork, and bureaucracy, the companies will respond accordingly. [. . .]
Investor choice would demonstrate whether Theory A or Theory B is correct. Alternately stated, letís send Sarbanes-Oxley to the court of investors.

Practice range back-biting

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woods_getty_masters.jpgSo, you think the competition on the PGA Tour is intense? According to this John Huggan/Scotsman article, the intensity of that competition is nothing compared to what goes on between the golf instructors of the top PGA Tour players:

Especially at the top level, the teaching of golf is a bitchy business. Typical was the vitriolic reception that Hank Haney received from many of his peers in the wake of his assuming the role of coach to Tiger Woods, replacing the aforementioned Harmon. For a while there, things were neither hunky nor dory.
The last word in that particular skirmish, however, belonged to Haney. In the immediate aftermath of the 2005 Masters Tournament – Woods’s first of four major victories under the tutelage of his new coach – the Dallas-based instructor lifted a leaf out of Harvey Penick’s Little Red Book, and took dead aim at one of his biggest critics, wannabe star teacher Jim McLean, describing him as “the biggest asshole I have ever met” – a label that left little room for misinterpretation.
“As for other teachers who have been critical [most notably and ironically, Harmon and Smith], it was obvious where they were coming from,” Haney declared. “I viewed them speaking out as a form of pre-emptive strike. They wanted Tiger to lose patience with me before we even got started, so I wasn’t surprised by the crap they were talking. Those other instructors never wanted to give us a chance. The result was never going to make them look better.”

Read the entire piece.

Comparing economic development

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Statesa.gifIn this NRO op-ed, Greg Kaza compares the economies of Texas and Arkansas over the past generation and concludes that talent and capital really do react logically to choices:

State Line Road is the boundary that separates the Arkansas and Texas sides of Texarkana, a border town that is sometimes described as ìthe Gateway to the American Southwest.î State Line, to the casual observer, is merely another road separating two states. But for those in the neighborhood, the road represents something of a great divide.
Of course, on the cultural side of the ledger, we have the date that will live forever: December 6, 1969. Thatís when the top-ranked Texas Longhorns edged the second-ranked Arkansas Razorbacks, 15-14, in a dramatic college football game witnessed by President Richard M. Nixon and George H.W. Bush, a congressman at the time. ìThe Game,î as it is known locally, is still talked about on both sides of State Line Road.
But in terms of economic growth, the divide is much more lopsided: Employment growth in Texas has been significantly higher than in Arkansas during periods of economic expansion. The population in Dallas has nearly tripled in the post-WWII period, while the population in Little Rock has barely doubled in size. Per capita personal income in Texas is 94 percent of the U.S total. In Arkansas itís 77 percent of the nationís total, a level that has hardly budged since the 1970s.
The list of statistical disparities is long, and thereís a good reason why: While Arkansas and Texas share a common border, each taxes income and capital in radically different ways.
Arkansas has a top income-tax rate of 7 percent, the highest among the bordering states. Texas, however, does not impose an income tax. The imbalance is the same for capital gains: Arkansas taxes them. Texas does not.
As a result, we can see a very basic economic principle at work: Talent and capital always will flow toward higher returns.

Read the entire piece.