How You Can Help Mid-sized Companies Save $2 Million And Spur IPOs & Employment

It is widely accepted that SMBs (small and medium sized businesses) will lead economic and employment recovery in the U.S. Unfortunately, clearly identifying business size, labeling and distribution is buried in statistical jargon. For today, Wikipedia's definition that "In the U.S., small business often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees" will suffice. It is also helpful to know, according to Google, that "there are more than 22 million private businesses in the U.S., and approximately 17,000 public companies." Given this basic data, let's look at how one aspect of a current bill on financial regulatory reform before the U.S. Senate this week, can save millions and spur the economy for free.

Today's WSJ reports "Senators Kay Bailey Hutchison (R., Texas) and Mary Landrieu (D., La.) have offered an amendment to spare the smallest public companies from the worst bureaucratic horrors of the 2002 Sarbanes-Oxley law [Sarbox] ... [that] saddle the U.S. economy with billions in unexpected costs. Even the Securities and Exchange Commission, a Sarbox cheerleader, found in a 2009 survey that the average public company pays more than $2 million per year complying with the law's Section 404. The indirect costs may be much greater, as initial public offerings of U.S. companies have never returned to pre-Sarbox levels."

Sarbox was a well intentioned attempt to improve financial transparency to would be investors but has not only fallen short -- it "did nothing to prevent poor disclosure at companies like Lehman Brothers" -- it's redundant audit requirements have made it even more difficult for smaller publicly traded companies (read Mid-sized) to pursue their fiercely competitive technology objectives. To wit, "the SEC admits that compliance burdens fall disproportionately on smaller companies" according to the Journal.

The Hutchison-Landrieu amendment "aim[s] to exempt companies with less than $150 million of shares held by the public from 'internal-controls' audits ... [which] are piled on top of the traditional financial audit, and on top of a company's own internal-controls review." So if you believe that this amendment can assist mid-sized company funding, innovation and help to create jobs at no additional cost, contact your Senators and tell them to vote for it.

William Busch

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