The New York Times sometimes has trouble sorting out business news items because of its bias in favor of greater government regulation over capitalist roaders.
On one hand, this NY Times Sunday article on the struggling airline industry suggests that perhaps the solution to the industry’s problems is to return to the era of regulation in which consumers paid higher prices, but airlines served better food on the flights. The only “experts” in the article quoted in favor of returning to those bygone days of high prices and limited service areas are union representatives, who believe that the higher-paying jobs of the regulation era are the birthright of airline workers. Hardly a mention is made of the fact that such increased regulation would bring increased costs to an industry that certainly doesn’t need more of those.
From a consumer standpoint, airline deregulation has been a remarkable success that has resulted in far cheaper prices and much greater service than ever before. Thus, while the Times’ premise for the article is that increased regulation could help the struggling airlines and their workers, the better premise would have been the following — i.e., despite the great success of deregulation, why are so many airlines continuing to struggle and why is it so difficult to put the chronically unprofitable airlines out of their misery?
On the other hand, this Times article notes that an unintended consequence of the increased regulation of public corporations under the Sarbones-Oxley legislation is that an increasing number of public firms are delisting because of the high cost of compliance with the legislation. Thus, as Professor Ribstein notes in this typically insightful post on the same article, “we can add a decline in disclosure as firms delist and withdraw from mandatory disclosure requirements” as further negative consequences of Sarbox.
For most businesses, the primary benefit of going public is the access to cheaper equity capital. Sarbox’s increased cost of compliance is effectively making that public equity capital more expensive and less attractive. Business owners don’t go public just for the joy of making public disclosures and dealing with class action plaintiffs’ lawyers.