Small Biz Watch: SOX filters down
Sarbanes-Oxley regulations were meant to stem financial abuse at public companies. But they're having an impact on private firms as well. A new survey of CEOs of fast-growing private companies found that more than 1 in 4—27 percent—is borrowing "best practices" from the Sarbanes-Oxley compliance regimes of public companies.
Why would they attempt to follow the costly and time-consuming regulations? One reason is to make their businesses more attractive for an initial public offering or as an acquisition candidate. "What we are looking at is an ounce of prevention to prepare for those events," says Pete Collins, survey director at consulting firm PriceWaterhouseCoopers, which conducted the survey. Still, most CEOs—73 percent—would not want these regulations to be mandatory.
Some other results:
- 38 percent of surveyed CEOs believe that private companies enjoy a competitive advantage over publicly traded companies because they're not required to comply with the same level of regulations.
- 64 percent report that regulatory concerns could potentially derail any plans to merge with public companies or become subsidiaries of one.
- 67 percent of those considering eventually going public say the cost of compliance with Sarbanes-Oxley and other SEC-imposed restrictions is a potential barrier.