You canвЂ™t look at the costs of something like SOX without examining the value it adds. That last piece is important to remember. The survey was also noteworthy because at least 50 percent of the companies surveyed felt their financial reports were more accurate and reliable, and almost 70 percent felt that had resulted in more investor confidence. Cangemi said in a press release in April. вЂњAs companies continue to find efficiencies in complying with Section 404 and make compliance part of a routine practice, we have seen a continued decline in costs,вЂќ FEI President and Chief Executive Michael P. An annual survey by Financial Executives International, or FEI, reported in April that the average annual cost of complying with SOX had fallen over the previous four years. In June, Bloomberg reported that IPOs worldwide had fallen 34 percent in dollar terms from the previous year, and would have been down even more if not for the $19.7 billion IPO by Visa.ДЇurthermore, thereвЂ™s evidence that as companies have learned to live with SOX, theyвЂ™ve become more efficient at complying. So I think the rise of IPOs last year and the fall this year had everything to do with economic cycles and little or nothing to do with SOX.ДЇor more evidence, consider that the IPO drought is extending outside the United States. I have no doubt that if Facebook вЂ“ despite questions about its revenue model вЂ“ was going public this month, investors would be frothing at the mouth. But I think the right company could still galvanize investor interest. Across the Bay Area, at least eight companies have withdrawn their IPO filings this year, but most cited market conditions for doing so. It appears to be inching ever closer and continues to draw some notable buzz. Those costs on a relative basis can be expected to decline over time.ДЄnd it certainly hasnвЂ™t stopped Rackspace from going public. On the other hand, Rackspace had to make big upfront investments because it determined it was not in compliance. It attributed about $4.7 million of that in large measure to compliance with SOX, out of a total of $331 million in expenses last year. In its latest filing this month, Rackspace noted that its general administration had jumped in 2007 to $103 million, from about $60 million in 2006, in preparation for becoming a public company. Consider Rackspace Hosting, a San Antonio company that has filed to go public. ItвЂ™s absolutely true that on a relative basis, SOX falls harder on smaller companies. If one of the choices was, вЂњWe invested in a lot of crummy companies with no business models,вЂќ it apparently didnвЂ™t make the top three. But now that IPOs have gone into hibernation, SOX is being trotted out as a scapegoat.Д®arlier this summer, the National Venture Capital Association, which has declared the lack of IPOs a вЂњcrisis,вЂќ said a survey of its members had identified three main culprits: skittish investors, credit crunch, Sarbanes-Oxley. Some of this moaning died down last year when the IPO market briefly came roaring back. In January 2007, Jim Clark, the Netscape co-founder, gave voice to lingering frustrations over SOX when he resigned as chairman of Shutterfly, insisting that SOX had вЂњgone too farвЂќ because it limited his ability to function as chairman because he was also a major investor. companies going public on foreign exchanges. Many blamed Sarbanes-Oxley (SOX for short) for the dearth of initial public offerings and pointed to the number of U.S. It also added regulations protecting whistle-blowers and eliminated some conflicts among financial analysts.ДЄlmost immediately, venture capitalists and entrepreneurs complained about the heavy burden this would place on start-ups вЂ“ although companies of all sizes didnвЂ™t hesitate to voice their opposition. These included penalties, some civil and some criminal, if companies failed to maintain tighter controls over record keeping, accounting and information technology systems.

The legislation created a host of new standards for public companies and their boards. Beyond that, there were up-sides to the new regulations that are commonly ignored.ДЇans of corporate governance policy (and really, who isnвЂ™t a fan?) will recall that Sarbanes-Oxley was passed in the wake of several corporate and financial scandals, and was signed into law July 30, 2002. The impact, I think, was always exaggerated and thereвЂ™s evidence that the costs of compliance are falling.

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