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12.9.2004
Public Choice at Work
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Panicked legislators passed, and a nervous President signed, Sarbanes-Oxley to save themselves from any charge of being soft on corporate malfeasance with an election approaching, not out of any considered judgment.
Now the bill is due (but of course the law-makers do not pay it), as compliance imposes high and pointless costs on small tech companies. USA Today says:
Smaller tech firms say the act, designed to prevent accounting fraud, creates busywork that drains resources — and shareholders' pockets. "All of this is really just paper-pushing," says David Anastasi, CEO of business software maker Captaris. "I haven't met one investor that thinks it's a good thing." Investment site Motley Fool (registration required) corroborates:
In a quick check of some . . . small-cap companies, I found that costs are indeed burdensome: Saucony . . . had $415,000 in Sarbanes-Oxley expenses, with revenues of $42.4 million for the quarter; Hooker Furniture . . . said the 18% increase in its SG&A expenses was primarily due to the new compliance costs; eSpeed . . . reported that on quarterly revenues of $39.8 million, it incurred Sarbanes-Oxley expenses of $700,000 -- a 70% increase over 2003 attributed solely to compliance! . . . .
Not everyone is suffering from the onerous requirements. . . . Big Four accounting giant Deloitte Touche reported revenues of $16.4 billion, a 9% increase over last year, fueled in part by the compliance business the firm reeled in as a result of the law.
As Will Rogers once quipped, "With Congress, every time they make a joke it's a law, and every time they make a law it's a joke."
posted by James DeLong : 12/9/2004 10:03:41 AM
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