NDTV: You are known all over the world for Sarbanes-Oxley Act, which is into sixth year. How has it affected corporate America so far?
Michael Oxley: I think the common goal was really about the shareholder but not necessarily about corporations. We have lost nearly $8 trillion of market cap in economic crisis and the act was able to restore investor’s confidence. The goal of the act was to impart more transparency and accountability into corporate America. I think investors feel a lot more confident now that information he is getting is more accurate.
NDTV: Going through the aftermath of economic crisis in US, you faced many problems. At that point of time, which was the single biggest problem you wanted to redress.
Michael Oxley: When we had hearings in case of Enron we asked the dean of Texas Law School to testify and do a thorough study on what happened. According to his conclusion all gatekeepers were responsible like credit rating agency, analysts, lawyers, accountants, etc. Clearly, in case of Enron it was the top elements who were particularly involved in the conspiracy. But the big question is why that thing was not uncovered until a whistle blower came to the fore. I think it pointed out some real weaknesses we had in our system, which hasn’t really been changed over 70 years.
NDTV: But according to you what was the biggest problem?
Michael Oxley: It is right to call these as accounting scandals. There was a lot of effort to mask losses and increase gains but there was a little effort on part of accounting professionals. At the core of it was the inability of accounting profession to really do a decent job and uncover such behavior.
NDTV: After the act came in place it made very good business for accounting companies but has the cost of compliance for individual companies gone up?
Michael Oxley: The cost of compliance went up initially because at first, we have brand new the public company accounting oversight board (PSAOB) under enormous pressure to come up with regulations and implementations. In the past few years we have had modifications by the PSAOB and SEC and just last year we had major changes in accounting standards, which will make it cost effective going forward.
NDTV: What is your opinion on insider stock trade?
Michael Oxley: In the past the knowledge was not there. At that time it was too easy for corporates to cook the books and public had no way of knowing it. Sarbanes-Oxley Act changed all that forever because old law (1933-34 act) allowed if you had a corporate insider stock trade, you had 90 days to report that to SEC. Our law made it to 48 hours in which you had to report it to SEC website.
NDTV: You have moved away from regulations to markets. As Vice Chairman of NASDAQ you are working in the interest of investors and companies listed there. How big has that move been?
Michael Oxley: NASDAQ is a unique entity and it is very progressive and innovative. It is obviously a good thing as NASDAQ after acquiring OMX Sweden has presence in six continents. We are now the largest stock market in the world and largest equity exchange in the world. Virtually every exchange in the world has copied our model of electronic trading except New York Stock Exchange.
NDTV: Are you talking to potential clients in India or looking at possible acquisition in India?
Michael Oxley: We have just engineered an agreement with an exchange in India to provide technology through OMX. We want to work closely with exchanges in India and also want to expand the number of Indian companies listed in US on NASDAQ. We think NASDAQ provides potential for a company to really have exposure to capital markets all over the world.
NDTV: Do you see interest of Indian companies willing to list on NASDAQ?
Michael Oxley: Yes some of the corporates have shown interesting in term of listing in NASDAQ. One of the advantages for a foreign company listing in US is 30 per cent premium because of fairness and legal strength of US market.
NDTV: In initial years after Sarbanes-Oxley Act was adopted in US there was a fear that it would drive some business to locate in UK and Europe. But it didn’t happened?
Michael Oxley: Yes it’s true because the other countries realized that raising of standards is an important tool for global image. At present we have more initial public offerings (IPOs) listed on NASDAQ than any other exchange of the world.
NDTV: What is you opinion on market conditions spanning out in next one year?
Michael Oxley: We have gone through these problems earlier also and normally the markets are stronger at the end. I think that you will find the same thing here. The flexibility and resiliency of world markets and India are amazing. We learn from out mistakes and move on. Now with the technology that people have, I think more people are going to participate in capital markets.
NDTV: Are you not worried about short term slowdown in the US economy?
Michael Oxley: Probably you are going to have such dips and no economy is recession proof. But we have proven through good official actions by Fed and Congress that you can make such recession shorter and shallower.