This act relates only to publicly owned companies.
There are 11 sections of the act, enforceable by the SEC. The sections cover corporate accountability and governance, and set in place stronger penalties for violations.
The act was designed to strengthen internal controls in publicly owned companies, improve transparency, bolster investor confidence.
Supporters say these controls have worked, and have been beneficial to cutting down on potential future scandals. Critics say the cost of compliance is too high and restrains economic growth.
The real drag on the economy is when firms like Arthur Anderson go bankrupt and drop 85,000 jobs overnight because they decided to cook the books when no one was watching ... to say nothing of the drag on the economy when Enron looted $11 billion from the State of California (among others) in the electricity crisis of 2001 for the same reason. Is the effect on small firms of under $75 million in capitalization other than hypothetical in comparison to these known costs of lax accounting oversight?
ReplyDeleteOne could make the argument that, in return for the service of being listed as a publicly traded company and the ability to raise capital that come with this, a firm should be expected to provide investors with rigorous and transparent guarantees that it is what it says it is. If that's too costly, then the company probably shouldn't be asking for the public's trust.