Private Enterprise Avoids Sarbanes-Oxley

Stephen Moore reports on Koch industries:

Back in 1967, when Mr. Koch was in his early 30s, he became the reluctant president of the family business, then a $177 million, medium-sized oil firm. He recalls: "My father threatened that he was going to sell the company if I wouldn't come back home to Kansas from the East Coast and run it."

Nearly four decades later, that family company is a global conglomerate with net annual sales that exceed the GDP of many small nations, and it includes a diverse range of businesses supplying everything from jet fuel to plastic, asphalt to beef, toilet paper to lumber. It owns many familiar brand names such as Dixie cups, Stainmaster carpet and Brawny paper towels. The firm's financial performance numbers have been positively gaudy, with a rate of return on investment that has outpaced the Standard & Poor's 500 at least tenfold under Mr. Koch's stewardship.

"We couldn't have achieved the profitability we have," Mr. Koch insists, "if we had been a public company. No investor would have been patient enough to allow us to build a firm oriented toward long-term growth and profits." This is one of Mr. Koch's bugaboos regarding the deficiencies of modern corporate management. He notes, "The short-term infatuation with quarterly earnings on Wall Street restricts the earnings potential of Fortune 500 publicly traded firms. Public firms are also feeding grounds for lawyers and lawsuits."

He then confidently predicts: "Regulatory laws like Sarbanes-Oxley will only increase the earnings advantages of private firms. I would suspect that there will be more of these private company takeovers of publicly traded companies."

More regulation isn't going to help bring companies public.