Wednesday, September 26, 2007

How Sarbanes-Oxley makes electronic startups less competitive

t's been five years since congress passed the Sarbanes-Oxley Act, and vice chairman of the Nasdaq stock exchange Michael Oxley (who as a congressman co-authored the Act) has been quick to insist that it's made U.S. firms more competitive.

"Other countries have stepped up and understood how important it is to have these kinds of standards, and I would expect that this will continue apace and continue to pay great rewards," he said recently.

However, while Sarbanes-Oxley may have prevented accounting debacles like those that plagued Enron, Tyco and WorldCom, it's also had a chilling and unintended consequence: reducing (and even eliminating) the attractiveness of an IPO as a growth strategy for small electronics firms. "Hardly a week goes by that I don't hear the CEO from a startup say that they can't go public because they can't afford to hassle with government regulations," says Doug Brockway, managing director at Innovation Advisors, a banking firm that caters to small and mid-market technology firms.

How Sarbanes-Oxley makes electronic startups less competitive

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