Corporate Governance

Foreign Investment, SOX and the Litigation Explosion

By J. Robert Brown

Remember about this time last year when everyone seemed to blame SOX for the perceived harm to US competitiveness?  Those complaints have largely evaporated.  Now its litigation that is harming the competitiveness of the US.  Even the Supreme Court in Stoneridge bought off on that unproven saw.  Well, the front page of the Sunday New York Times included an article on the rapid pace of foreign investment in the United States. 

According to the article, last year, "foreign investors poured a record $414 billion into securing stakes in American companies, factories and other properties through private deals and purchases of publicly traded stock".  Other common law, English speaking countries came in at the top of the foreign investment list (Canada, Britain and Australia).  The UAE and Saudia Arabia were 6 and 7, China and Kuwait were number 14 an 15.  As the piece noted, the "most conspicuous beneficiaries are Wall Street banks like Merrill Lynch, Citgroup and Morgan Stanley."

The weak dollar is a major explanation for the investment surge.  But surely the integrity of the markets helps.  SOX and litigation play roles in ensuring that the US has the least rigged, most open capital markets in the world, with corporate disclosure the most robust.  Those arguing otherwise have not made the case, although they managed toconvince Justice Kennedy, as his recent opinion in Stoneridge illustrates.

Full post as published by The Race to the Bottom on January 24, 2008 (boomark / email).