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Private Companies Struggle with the Sarbanes-Oxley Act. Samuel Smiles, an
18th century Scottish, writer once said, “It is possible ...
... Private companies can react more quickly to challenges and ... A private firm is more
inclined to take ... investor relations officers (IRO) often struggle with legal ...
Submitted by MBA03 on June 1, 2006
Category: Business
Words: 1962 | Pages: 8
Views: 489
Popularity Rank: 16,941
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Samuel Smiles, an 18th century Scottish, writer once said, "It is possible that the scrupulously honest man may not grow rich so fast as the unscrupulous and dishonest one; but, the success will be of a truer kind, earned without fraud or injustice. And even though a man should for a time be unsuccessful, still he must be honest: better lose all and save character. For character is itself a fortuneÂ…" (Zaadz, 2005). Major corporate scandals such as Enron and WorldCom shook the business world at the turn of the century in a powerful way. The level of deception that seeped out of these scandals shocked and amazed Americans and the world. As a result, investor confidence began to decline and suspicions began to soar. Our eyes were opened and we knew that things could not stay the same. In 2002, Congress mounted a reform attempt, led by Representative Michael G. Oxley (R-Ohio) and Senator Paul Sarbanes (D-Md). Both believed that the affectionately termed Sarbanes-Oxley Act would help to restore investor confidence and deter fraud. SOX has been the most aggressive legislation targeted to U.S. Securities Law since 1934. Public companies have been scrambling to shape up their acts in order to align with Sarbanes-Oxley (SOX); however, private companies have flown under the radar screen trying to avoid the matter altogether. The main reasons private companies have avoided compliance relate to the labor and cost incurred to comply. However, analysts believe that the benefits will outweigh the cost in the long-run for private companies if they get on board with SOX now.
The Cost to Comply
Companies that have set out to comply with the Sarbanes-Oxley Act have found that there is a heavy price to pay for compliance. In their paper, Henry et. al (2005) cite a survey of board members at several large companies conducted by RHR International for Directorship magazine. The survey found that companies with $4 billion or more in revenues are...
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