Is Sarbox Worth It? Let Investors Decide

Lora Bentley

Do the costs of Sarbanes-Oxley outweigh its benefits, or does the strict law protect investors enough that they are willing to pay more for stock when a company complies? These questions have been asked countless times -- and we usually get different answers each time.


At, AEI resident fellow Alex J. Pollock says the only way to really get an accurate answer to the question is to make Sarbox voluntary -- at least for small businesses. If investors are willing to pay the premium that some predict for Sarbox compliance, they will, and the value of the companies that comply will increase. If they're not willing, then they're not, which means the company is wasting its time and money trying to comply.

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May 31, 2007 1:56 AM David David  says:
That is a false choice because the investors will not decide the companies will decide and the vast majority will not do anything if not required.The investors will just have to take the chance that despite the lack of controls the company is using their capital in the best way possible to give a return to stockholders. That is why we have Private Placements in this country with accredited investors who can comb through the company and include a risk assessment for fraud and material mistatements due to lack of controls. It is the price to pay for public to have confidence that what is reported is accurate and complete as well as that the funds invested by the shareholders are being invested in a manner that provides the best possible risk/return for their capital and is not being misappropriated or mismanged by the executives or other senior management.Shareholders would have no mechinism, especially in a small company where the public float is usually less than 50% so the shareholders could not even force the company to comply.So if you don't want to comply...take your company private...otherwise why would you not want to have good controls over your company...unless you have something to hide. Reply

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