Ed Driscoll.com Ed Driscoll.com
Sabanes-Oxley Not NYSE For New York
By Ed Driscoll · May 24, 2006 08:46 PM · Capitalism, the Unknown Ideal

In late 2004, we noted that some economists believe that the Sarbanes-Oxley Act of 2001 has caused a growing number of businesses to register with foreign stock exchanges rather than the New York Stock Exchange to avoid its onerous enforcement procedures. City Journal's, Nicole Gelinas writes that Sarbanes-Oxley could have negative consequences for the city of New York as well:

The New York Stock Exchange’s proposed merger with Paris-based Euronext, which runs four electronic stock exchanges in Europe, may seem like positive news for New York’s economy. Wouldn’t it be great for Gotham to have the world’s first global stock exchange headquartered right on Wall Street, as the NYSE intends? But in fact one of the NYSE’s key reasons for initiating the merger carries troubling implications for New York’s economic future.

Many corporate executives, particularly those heading up-and-coming entrepreneurial companies at home and abroad, now consider the New York market an obsolete place to do business, and they are flocking to exchanges in Europe instead. In 2005, the NYSE and the Nasdaq won only 28 new international listings, a modest 16 percent increase from the year before; by contrast, the two major European exchanges, the London and the Luxembourg Stock Exchanges, won 50 listings between them, more than double their new listings in 2004. The NYSE is reaching across the Atlantic just to stay competitive.

Europe is winning business that once went automatically to New York largely because companies find that the burdensome requirements imposed by America’s four-year-old Sarbanes-Oxley law simply aren’t worth the trouble. Sarbanes-Oxley (SOx), enacted in haste by Congress and signed by President Bush just months after Enron’s 2001 demise shook the financial markets, requires companies to jump through numerous hoops each year at the behest of government regulators. Companies of all sizes now must spend millions of extra dollars annually to ensure that they have adequate “internal controls” in place if they want a listing on a U.S.-based stock exchange. The Chicago-based Foley & Lardner law firm has estimated that for medium-sized companies, the “cost of being public” has risen 223 percent since 2002, due to these new rules.

SOx’s purpose is to minimize the risk of improper and inconsistent accounting practices, especially those that some managers employ to smooth over volatile quarterly numbers or to paint a falsely positive picture of their companies to investors. But because regulators haven’t spelled out exactly what they mean by good “internal controls,” company executives must guess, adding massive uncertainty to the cost of doing business. The law also forces companies’ chief financial officers to spend inordinate amounts of time shuffling through bureaucratic paperwork, instead of helping to map corporate strategy.

European and Asian companies that, like the vast majority of their American counterparts, already boasted rational accounting and auditing policies long before SOx understandably aren’t interested in spending all that extra money just to list in New York. And they’re finding plenty of willing investors abroad anyway. “Five years ago, most big companies seeking public financing felt compelled to list their shares in New York. Today, non-U.S. companies are finding markets like London and Hong Kong equal to the capital-raising task,” the Wall Street Journal reported Monday.

As Gelinas writes, "Chuck Schumer, call your office", and work to fix this law.



Since 2002, News, Technology and Pop Culture, 24 Hours a Day, Live and in Stereo!

(And every Saturday on Sirius XM Satellite Radio.)

What They're Saying

"Ed Driscoll Has Seen The Future And It Computes"--Pajamas Media, May 9, 2007


Navigation
Weblog
Ed TV
Podcasts
Twitter Feed
Articles
Essays
Interviews
Links
About Me
FAQ
Photos

Home

Support the Site

Search

Archives
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
May 2004
April 2004
March 2004
February 2004
January 2004
December 2003
November 2003
October 2003
September 2003
August 2003
July 2003
June 2003
May 2003
April 2003
March 2003
February 2003
January 2003
December 2002
November 2002
October 2002
September 2002
August 2002
July 2002
June 2002
May 2002
April 2002
March 2002

Etcetera


Bookmark Me!

Blogroll Me!

Steal This Button!

Syndicate this site (XML)
Podcasts Feed

AddThis Feed Button

AddThis Social Bookmark Button

youtube_logo.gif

Our Podcasts' Apple iTunes Page

Powered by
Movable Type 3.35

Site design by
Sekimori

tumblr site counter
Copyright © 2002-2008 Edward B. Driscoll, Jr. All Rights Reserved