Commentary: 11-05-08 Dismantled or SOX II?

Great small article here from TechCrunch.

Below is some of the article. But I doubt there will be any dismantling of SOX and the regulation will only be made larger. More of that Good, Good, Good, Good Interventions. Sing the last sentence like the Beach Boys song; Good, Good, Good, Good Vibrations.

The Sarbanes-Oxley Act, enacted July 30, 2002, was a classic case of a knee-jerk government action that did lots of harm and very little good. The goal was to reform public company accounting rules to avoid future scandals like those that played out at Enron, Tyco, Adelphia, Peregrine Systems and WorldCom.

It didn’t prevent insolvencies and accounting shortfalls in companies such as Bear Sterns, Lehman Brothers, American International Group (AIG) and Merrill Lynch.

The average company will now take 12 years before it can successfully issue an initial public offering (IPO) (up from 5 years pre-Sarbanes-Oxley) because they do not have enough capital to cover the estimated $4.36 million hidden tax in yearly compliance costs (The initial estimate from the Securities and Exchange Commission was approximately $91,000 per company on average).

Smaller public companies went private or merged: “In 2006, the law firm Foley & Lardner LLP conducted a survey of 114 public companies on the effects of Sarbanes-Oxley. Twenty-one percent of companies were considering going private, 10 percent were considering selling the company, and 8 percent were considering merging with another company”

U.S. companies are going public on foreign exchanges to avoid the Act: “In 2005, a report by the London Stock Exchange cited that about 38 percent of the international companies surveyed said they had considered issuing securities in the United States. Of those, 90 percent said the onerous demands of the new Sarbanes-Oxley corporate governance law had made London listing more attractive.”

Sing with the Beach Boys!