Is SOX Hurting Competitiveness?


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Sarbanes Oxley : Governance : Thought Leader

Is SOX Hurting Competitiveness?

Richard Brounstein
Chairman
FEI

Financial Executives International's (FEI) Small Public Company Task Force has expressed concern that regulatory requirements of the Sarbanes-Oxley Act are hurting the competitiveness of smaller public companies and called for more practical solutions for such companies while still protecting investors.

The statement comes in advance of a December 14th public meeting of the Security and Exchange Commission's (SEC) Advisory Committee on Smaller Public Companies, at which time the SEC is scheduled to consider possible changes to current rules for smaller companies.

"The U.S. economy depends on smaller companies, particularly for innovation and new job creation," said Richard Brounstein, chairman of the FEI Small Public Company Task Force.

"But as currently designed, the implementation of Section 404 of Sarbanes-Oxley drains the limited resources of small companies particularly hard. The efforts and recommendations of the SEC's Advisory Committee to develop a better approach represent a worthwhile and important investment in the future of smaller public companies to ensure they are not unduly disadvantaged."

According to the SEC Office of Economic Analysis, companies with less than $700 million in market capitalization make up about 80% of all public companies, but only 6% of total stock market value.

According to FEI survey data collected from public companies in March, companies with annual sales between $25 million and $99 million have seen their audit fees jump 71% from Section 404-related work.

Those with revenue between $100 million and $499 million saw audit fees rise 66%, compared with an average increase of 47% for the largest public companies surveyed."The regulatory requirements of 404 have taken a 'one size fits all' approach and amount to a barrier to the growth of smaller companies," continued Brounstein.

"It would be detrimental not to pursue an effective alternative that preserves the intent and spirit of Sarbanes-Oxley while being more sensitive to smaller companies. We look forward to the Advisory Committee recommendations."

About FEIFinancial Executives International (FEI) is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy- making positions as chief financial officers, treasurers and controllers.

FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications. Members participate in the activities of 85 chapters, 74 in the U.S., 11 in Canada.

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