SOX Hurting Small Business?

After a deluge of complaints by such organizations as the American Bankers Association and the American Electronics Association that Sarbanes-Oxley is wreaking havoc on small business budgets, the SEC in late December formed the SEC Advisory Committee on Smaller Public Companies to look at the problem and recommend reforms. The first order of business? Determining what constitutes a “small” business. Herbert Wander, the committee’s co-chairman and a Chicago-based partner at law firm Katten Muchin Zavis Rosenman, will work with members to identify which kinds of companies would most benefit from reforms. “We need to figure out the different pressures on companies that have revenues of, say, $200 million versus $700 million,” Wander says.

The fear is that the overwhelming costs of SOX—the SEC estimates that public companies are spending as much as $1.2 billion collectively per year to comply—make it difficult for small companies to compete in a global marketplace. As a result of those costs, smaller companies are seeing their profits shrink, which damages their stock price and puts them at risk of a takeover. Says Wander, “I got a letter last week from a guy who is spending 12 percent of his pretax profits on SOX. Is what we’re getting from that guy worth his 12 percent? Do we want to encourage consolidation?”

Although Wander says the panel “will try to responsibly make as many recommendations as early as possible,” the committee isn’t scheduled to complete its evaluation until January 2006 at the earliest.

CIO Insight Staff
CIO Insight Staff
CIO Insight offers thought leadership and best practices in the IT security and management industry while providing expert recommendations on software solutions for IT leaders. It is the trusted resource for security professionals who need network monitoring technology and solutions to maintain regulatory compliance for their teams and organizations.

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