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President’s Council on Jobs Report Suggests We Should Try Sarbanes-Oxley Light for IPOs
- Adrienne Gonzalez
- October 31, 2011
Barbara Roper wrote a commentary piece in WaPo Capital Business over the weekend that suggests the unthinkable: softening hard ass SOX rules for IPOs could actually kill jobs. How is that possible? Aren’t IPOs great for the economy?
Well, not always. Case in point: Groupon. Healthy, financially strong businesses are good for the economy. Scams, frauds or even overambitious accounting tricks might temporarily get the economy’s spirits up like a few rails of coke but eventually reality sets in and the economy is left broken and penniless in the alley looking for its next hit.
The report is an effort on the part of the Obama crew, who surveyed 27 business executives (including AOL’s Steve Case… and we know how his business turned out) for ideas on how to get the economy moving again. Among the suggestions, the report recommends Congress make compliance with all or part of Sarbanes-Oxley voluntary for public companies with market valuations up to $1 billion or, alternatively, exempt all companies from SOX compliance for five years after they go public.
The report blames burdensome SOX rules for the sharp drop in small IPOs in recent years, writing:
In the aftermath of the dot-com bubble and unintended consequences stemming from the Spitzer Decree and Sarbanes-Oxley regulations, the number of IPOs in the United States has fallen significantly. This is especially true for smaller companies aspiring to go public. As noted earlier, the share of IPOs that were smaller than $50 million fell from 80% in the 1990s to 20% in the 2000s. Well-intentioned regulations aimed at protecting the public from the misrepresentations of a small number of large companies have unintentionally placed significant burdens on the large number of smaller companies.
That would totally work as a justification except the SEC already debunked this silly idea. In a report earlier this year recommending no new 404(b) exemptions, SEC analysis showed that the United States has not lost U.S.-based companies filing IPOs to foreign markets for the range of issuers that would likely be in the $75-$250 million public float range after the IPO. “While U.S. markets’ share of world-wide IPOs raising $75-$250 million has declined over the past five years, there is no conclusive evidence from the study linking the requirements of Section 404(b) to IPO activity,” the report stated.
And as we all know, companies under $75 million haven’t had to worry about the SOX burden at all thanks to Congressional intervention. So how could it be that the burden they haven’t had has somehow prevented them from going public?
New boogeyman, please. I’m no huge fan of SOX but you’re going to have to come up with something better than this to convince me it’s a good idea to can it.
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Why Would Fourteen Baker Tilly Partners Give Up Equity for Salary?
- Caleb Newquist
- April 13, 2011
This one’s a stumper.
Accountancy Age reports that 14 Baker Tilly partners are giving up their equity stakes to go on salary including “international CEO Geoffrey Barnes, head of IT advisory Richard Spooner, and six partners from the London office.” A spokeswoman told AA that this is simply a change in “remuneration” and the fourteen individuals would remain partners and there “would be no change to client services.”
Riddle me this partners out there: why would a person with an equity stake go back to being a senior manager (i.e. in terms of the compensation structure)? Something doesn’t compute there. Since we’re dealing with the international CEO and head IT advisory, maybe there’s some kind of political or solidarity motive here but the Accountancy Age report is skimpy and its editor Gavin Hinks admits that there isn’t much to go on and gets to speculating:
The big question people are asking is what does it mean? Or does it mean anything at all? There are a number of reasons a partner’s status might change. They may simply no longer want the risk of being partner. The firm may believe profits are too diluted and want fewer partners.
I personally don’t buy the first motive. If they were sick of the risk, why not just leave the firm? There are plenty of jobs out there with better compensation packages. Diluted profits is a little more plausible but the international CEO and head of IT advisory? Why would they opt out? Since the partners in question made this decision themselves, it’s unlikely that this was a punitive measure but perhaps BT had a little bit of an internal email scandal, they were given a multiple choice form of punishment and this was the least severe option? I’ve really got nothing better at this point. People with theories that are slightly above the crackpot level are invited to share.
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Friday Footnotes: You Deserve a Raise; Data Literacy; IRS Wants Your Body | 5.21.21
- Going Concern News Desk
- May 21, 2021
How to ask for a raise when the pandemic nears its end [Journal of Accountancy] […]