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Wednesday, January 25, 2006

Private Companies Voluntarily Adopt Sarbanes-Oxley Principles

Although most CEOs of fast-growing private companies agree that fewer government regulations are better, more than one in four is borrowing “best practices” from the Sarbanes-Oxley compliance experience of public companies—often to make their business more attractive for public financing or as an acquisition candidate. Many remain concerned however that regulatory compliance, whether voluntary or mandated, is overly costly.

Learning from others' experience. CEOs of fast-growing privately-held businesses are more positive than negative in their assessment of how the Sarbanes-Oxley Act has affected corporate governance and transparency in the public company sector. And although one in four of these private businesses have voluntarily adopted Sarbanes "best practices," three in four are opposed to mandating of these principles across-the-board:

• Thirty-seven percent say Sarbanes-Oxley has done a good to fair job of improving governance and transparency for public companies, while another 34 percent have mixed feelings, and only 17 percent believe it has done a bad job overall. The remaining 12 percent are on the fence or did not report.

• One-fourth (27 percent) of those surveyed say their company has adopted Sarbanes-Oxley best practices. Among these, 30 percent have applied its principles in governance, 26 percent in transparency, and another 43 percent in both areas. Adopters tend to be from larger businesses, averaging $74.2 million in revenues (51 percent above the average). They have grown faster over the past five years, and expect 25 percent higher revenue growth over the next 12 months.

• However, 73 percent of those surveyed oppose any future federal or state regulations that would impose provisions of Sarbanes-Oxley upon other than publicly-traded companies—saying this would be regulatory overkill (62 percent) or a bad precedent (11 percent). Only five percent say such regulations would be a good way to improve transparency across-the-board, while 19 percent say this may be a good idea for some, but on a case-by-case basis.

posted by Brian Moran @ 12:04 PM   0 comments

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