Here's an interesting piece that says it's hurting small investors:

Today, it is much harder to get in on the firms that could be the next Home Depot, unless you are a super-wealthy investor that can participate in private equity deals. According to BusinessWeek, the median market cap of a company going public was $52 million in the mid-1990s. Today, it's $227 million. This means that average investors are increasingly shut out of a company's emerging growth stages, where they would, yes, take the most risks, but also could reap the biggest returns.

The most costly provision, Section 404, forces auditors and executives to sign off not only on the accuracy of financial statements, but also on a company's internal controls. The unaccountable Public Company Accounting Oversight Board created by the law has defined "internal controls" very broadly, to include a firm's software and other items that have little relevance to financial statements. Some say the law should be called the Accountants Full Employment Act.

As usual, hard cases make bad law. This gross overreaction to the Enron debacle can only make it harder for space entrepreneurs to raise money. Here's hoping for some reform.

I would imagine Enron, Anderson and Worldcom
hurt far more small investors, then anything S-Ox
has done.

The entrepeneurs should be glad that a solid
accounting standard now exists.

Yes, you would imagine all kinds of fantastic things. Fortunately for the rest of us, our imaginations are less vivid, and more grounded in reality.

From the other side of the fence, if you're with an aggressive growth fund, they sometimes jump on board a new company before the public can. Besides, its all a good thing anyway. Invest in strong companies with a proven track record that pay a good dividend and make your money that way. Trying to hit the ball out of the park with an emerging company will more likely leave you broke than rich.

I can vouch personally that a Fortune 50 company is paying through the nose to comply with SOX. I have heard generic numbers thrown about estimating a total cost of 1% of revenue (hundreds of millions of dollars a year), and I have little doubt that this cost is being exceeded; vastly exceeded, if you count the opportunity cost of having most full-time employees filling out paperwork instead of doing their jobs (which are being done by (often offshore) contractors, since the full-time employees are too busy with the paperwork).

As an investor--yeah, it's just a 401k and what I've scrounged around to save up over the years, (I'm not rich) but it's *my* retirement at stake here--I am extremely concerned about the effect SOX is having on my investments... and what it's keeping me from ever investing in, because only rich investors who have connections can invest in those private equity deals.

Would Amazon or EBay have ever gone public in today's environment?

So Simberg,

Do you know how much Shareholder value was lost in Enron?

I work in the operations group of a middle-sized eCommerce firm (hence SOX compliance is in my area of responsibility), and I can tell you from personal experience that it is a disaster for small and mid-sized enterprises. Forget the mountains of papwerwork and the lost man-hours monitoring and enforcing compliance, forget the opportunity costs to the enterprise itself. The chilling effect of the regulation on any firm, the tendency to grow red tape EVERYWHERE in the nanme of 'documenting internal processes' is both pernicious and poisonous.

To the idiot who suggested that more stockholder value was destroyed by Enron, I would point out that SOX does far more damage, but it does it silently and on a very broad basis, much like siphoning off a little bit of blood over a very long period of time rather than a single catastrophic injury. You survive the former, but in the end, you are enervated and injured just the same.

Anony-moron is Paul Krugman! It makes sense---the rabid BDS, the utter inability to think coherently for all the rage, the automated response-like blathering, and, the real proof in the pudding, the inflation of Enron's significance to take up all the air in the room.

Paul, you do remember claiming that Enron was a bigger event than 9-11, don't you?

Depends upon your measure.
By value destruction yes.
By lives lost no.

Anybody who still thinks SOX was a good idea has never had to work with it.

It has done nothing to provide "a solid accounting standard." Every individual auditor comes up with their own ideas of what is sufficent documentation that a control has been met.

The really sad part is _nothing_ about SOX would have prevented Enron.

TL

One of the SOx rules is that the accountants can't sell
consulting to the firm.

That would have done a lot to help.

Anderson was being bribed into doing bad audit for
lucrative consulting in Global Crossing, Enron
and Baptist Life

I am no expert (as if anonymous is) but the guys that are seem to agree that SOX would not have prevented Enron and etc.

I am reasonably competent in my field (IT) and SOX is pretty damned dumb from that point of view.

I work for a group with ten people. Our reporting requirements equal 40 man-hours a week - an entire employee! We don't have the budget to hire a person for that so the load is spread around. Death of a thousand cuts ...

A large company can easily absorb damage like this. A small company not so well.

The 404 controls may not be fully understood as to
what is needed and what isn't but, one of the problems
of the 90's was far too many firms were going public.

If SOx means more mature larger firms go public this
is probably a good thing.

Far too many money losing business went public

For which, Anony-moron undoubtedly blames Bush.

Nope, that was the Republican congress.

They blocked rules tightening up GAAP and the SEC