Wednesday, November 12, 2008

Time to Repeal Sarbanes-Oxley?

This hastily passed Act post Enron has done nothing to prevent such collapses recurring and certainly has had no positive effect on the current economic situation. It is essentially just a massive tax on compliance at the worst possible time. 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. It’s time for Congress to at least review this legislation. In the last five years, far fewer tech companies have made it to IPO or even been considered for an IPO in the U.S. markets. Furthermore, start-ups can't wait 12 years for an IPO; entrepreneurs could have created three companies in that time frame! As a result, the U.S. has become less competitive and many small companies have listed on the London markets. How is that good for America, especially in these times? • “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.” Tech firms in particular are not being encouraged to expand here in the U.S. where we now desperately need job creation. The tech industry is one of the most important sectors in our economy. It is technology that arguably got us out of the last major downturn in the early 90’s. • In the second quarter of 2008, there were no public offerings of Silicon Valley venture capital-backed companies, a phenomenon not seen since 1978. In the third quarter there was only one. If this draconian law is not repealed, then we could see Silicon Valley’s status as a hot-bed of innovation erode and see more and more of the future invented outside of the United States, taking much needed jobs overseas. President Elect Obama campaigned on “Change.” It’s time for change of the Sarbanes-Oxley law at the most critical time in our economy. Mr President Elect Obama, this is the easiest and quickest way to create jobs! Got a comment, please post or contact me for consulting at businessissues@gmail.com

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