A Swiss Management Center Report
Compliance is costly. Since its inception in 2002, the Sarbanes-Oxley Act (SOX) has drawn the ire of companies traded in US capital markets. Steep fees have led to an aggregate compliance spend of US$5.8 billion in 2005, according to research firm AMR, diverting a substantial sum of funds which otherwise could be invested in growth. The opportunity cost has been staggering.
The cost of compliance has been most pronounced in smaller public companies. Without vast resources and economies of scale to support their efforts, smaller public companies struggle to comply with SOX. While absolute costs are lower for smaller companies, they pay a disproportionately high amount to attain SOX compliance. Larger public companies can accept SOX as part of the cost of doing business, however grudgingly. For smaller public companies, SOX is a salient barrier to growth.
Methodology
Micro cap companies have received a steady stream of deferments, sparing them the disproportionately high costs of compliance. Though larger companies have had to comply, their relative sizes and maturities of operation make it difficult to apply their lessons to smaller counterparts. Smaller companies can learn from "mid cap" companies, which currently have to comply but which lack the financial and human resources of the Fortune 1000.
See full Article.
Posts
