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U.S. Securities and Exchange Commission

Responses to ACSPC Request for Public Input

General Impact of Sarbanes-Oxley Act

Question 3. Do you believe SOX has enhanced, or diminished, the value of smaller companies? Please explain.

08/02/2005 13:57:44   Diminished. See above.

08/02/2005 14:31:32   ABSOLUTELY DIMINISHED! When companies with market caps of less than 100 million are spending 1 to 2 million dollars or more to comply with SOX JUST FOR THE FIRST YEAR, it is INSANE. Small companies already have substantial costs of audit, standard SEC compliance, etc., so to put this on top of all the other costs is patently ridiculous.

08/02/2005 17:44:12   On the whole it has diminished the value of smaller companies be virtue of costs and the diversion of managments time away from running the business in favor of onerous compliance.

08/02/2005 18:15:55   diminished. they spend all their time on regulations. the process has become much more important than the product. regulations stifles small companies to the max

08/02/2005 23:36:32   Deminished. Too costly.

08/03/2005 01:39:17   It has diminished their value. It is of little value, and has tremendous cost. It is a major distraction. However, the biggest problem is the manner in which it is administered by audit firms. Without tort reform, the audit firms are running scared and terribly over-doing the auditing.

08/03/2005 07:01:34   diminished, the pendulum has swung too far. I beklieve the intent of sarbanes oxley is noble, but the unintended consequences are devastating to capital formation by honest small companies.

08/03/2005 08:55:04   Deminished due to the associated cost.

08/03/2005 08:58:39   Small companies like ours are regulated. We are a National Bank and the OCC keeps pretty close tabs on us. In addition we have an outside accounting firm that does Audits on our bank. We also have outside loan review. The value is down because the profit is gone.

08/03/2005 10:40:26   Diminished. The problems that arose that resulted in SOX related to large companies. The costs associated with SOX compliance have reduced income and ratio's, thus making smaller companies less attractive to investors.

08/03/2005 10:50:30   DIMINISHED! Ref. above. The effect to the entire comany is felt in higher reporting costs and diverted staff time. The alternative is to BUY " independent research ".

08/03/2005 11:03:25   It has certainly diminished the value of smaller companies such as ours due to increased regulatory costs. It is having a sizeable impact on non-interest expense in terms of direct and indirect costs. And this is before costs of the increase in external audit.

08/03/2005 12:17:58   deminished, wasting money on process and taking away from production.

08/03/2005 13:55:42   SOX has/is making it very diffuclt for small companies because it is expensive.

08/03/2005 15:01:40   Diminished them since more resources and time must be spent on compliance and control issues rather than strategic isssues which could build greater value for shareholders.

08/03/2005 15:22:49   SOX has only diminshed the value of smaller companies, especially those within the financial sector that have already been under close regulatory supervision.

08/03/2005 16:58:51   Diminished. Our 2004 net income was about $1.4 M. We are anticipating spending about $500k on SOX compliance (consultants/audit fees) in 2005/2006. Many people believe it will cost 40% of the first year fees on an ongoing basis as well. The value we get in return is minimal and isn't appreciated by shareholders.

08/03/2005 18:01:35   Please look into item no 29

08/03/2005 18:05:44   SOX has diminished the value of smaller companies because of the necessity of spending precious resources on SOX compliance. The very survivial of a smaller company is at stake when any resouce, cash and management time, is spent on compliance and not on building the company. Investors realize this and may not invest in a smaller company since the cash will not be used for company projects.

08/03/2005 18:30:29   x

08/03/2005 19:54:33   SOX has done neither. The values of companies will be established by the true value of what the company has to offer, either in assets, products or ideas. The WORTH of the company, as measured by the price per share times the number of shares is anpother matter. SOX, through its ineffectiveness, has continued to let the practice of counterfeiting shares continue, thus diluting the company's share structure and reducing the company's worth. If SOX had been implemented as it was intended to be implemented...it could be a useful tool in helping combat the practice of naked short selling of shares.


08/04/2005 09:17:19   I would like to think that it would enhance the value of smaller companies. With what section 404 is doing alone, it should give investors confidence in the practices of the company.

08/04/2005 09:37:56   A toss up - more money spent on compliance and less of development - it has hurt the most important area of US job creation

08/04/2005 09:39:15   Enhanced. Many of these companies had such weak controls that much of the stockholders value was being squandered by management.

08/04/2005 10:40:16   It has decreased earnings per share. The cost of compliance for a small company with only one person in the finance department is disproportionately high.

08/04/2005 12:09:05   Diminished. As I said earlier, the economies of scale are in the larger companies favor when it comes to SOX compliance. I think there was a need for greater accountability of management actions, but at the same time, for a fraction of the amount of money being spent on SOX, a better system could be devised. It is just too great of a burden on the smaller companies for little tangible benefit to shareholders.

08/04/2005 13:38:24   For non-highly regulated industries...Sox has probably helped, but for the financial services industry, I don't see that SOX has added much benefit. I would like to see financial companies granted a 404 exclusion because they are already doing much of the work required of 404 through FDICIA.

08/04/2005 13:53:47   diminished...see below

08/04/2005 14:20:27   Diminished, most of the crooks were in large cap companies!

08/04/2005 18:05:44   SOX section 404 has improved some controls but at a very high cost which then dimishes the value of the company.

08/05/2005 10:54:31   I do not believe that the regulation has either enhanced or diminished the value of any company. The reality is that very few discussions about the value of companies center on its auditors report on internal controls. I have yet to see a statement by an analyst covering a company that puts a value on the auditors report regadless if it is excellent or if the company had a material weakness.

08/05/2005 12:38:34   Enhanced IF ENFORCED!

08/05/2005 12:44:28   I believe that SOX has the potential to adversely impact smaller companies disproportionate to larger companies and thereby diminish or discourage small companies from the public capital markets.

08/05/2005 15:34:53   It has diminished the value. The money and manpower that are critical to a small company's survival are diluted.

08/05/2005 15:43:46   For small or community bank that are highly regulated with annual to 18 month examinations plus annual external audits and internal audit procedures there is serious question about added value. There is general agreement that the benefits do not meet the cost. See NC Bankers Assoc survey and Grant Thornton national banking survey on the subject.

08/05/2005 16:45:38   SOX enhances companies values by getting fair, complete and accountable reporting into the marketplace. Companies that don't want to comply are usually seeking to cover their tracks, and are not unduly burdened by accountability. If I am held accountable, I want my employers to be accountable just as any shareholder wants his portfolio stocks and funds to managed by accountable people and companies. I cannot see anyone saying it is too burdensome to be accountable, and I can't see SOX being less than beneficiary to a market that needs to know that those in charge are personally accountable for their actions. That is a MUST after Enron, Tyco, Wolrdcom and SCO Group - who have not been held appropriatekly accountable yet.

08/05/2005 19:33:08   Probably reduced the value slightly.

08/06/2005 13:52:06   Diminished value. Initial and continuing costs of compliance are far higher than the value of benefits, so there is a net reduction in value.

08/08/2005 09:29:48   Diminished.

08/08/2005 11:10:11   it has diminished the value of small companies because investors know that a very big chunk of the EPS is going to be lost to unnecessary SOX related testing and controls which makes a small companies ROI pathetic compared to a fortune 500 that can have SOX compliance barely dent their EPS.

08/08/2005 11:39:29   Daily stock prices for small companies are difficult to explain based on low average daily activity. The long term affects include higher expenses and, more importantly, more focus on complying with documentation standards and less focus on generating new business.

08/08/2005 14:06:10   I can't see where it has enhanced the value of small companies. I have not heard of anyone yet who has gone through the implementation of SOX and has come away with the position that the benefits received justify the cost. The cost of SOX implementation, because of simple economies of scale, generally has a much more significant impact on earnings per share for smaller public companies than it does for larger companies. For many companies, large and small, stock prices tend to trade on amultiple of earnings. In our company, we initialy estimated the cost of SOX compliance to be in the range of 10% of pretax earnings in the first year, and that does not include the additional audit fee costs that are being charged by the National CPA firms, because their resources, have been stretched, and they just generally can charge more money for essentially the same service. The cost of compliance will continue to push down earnings for smaller companies and will therefore diminish their value in the marketplace.

08/08/2005 15:43:24   The overall law is good and will be very positive for the financial reporting prepared by all public companies. It will enhance the value of smaller companies in the long-term. The 404 rules are a mess for smaller companies and will hurt values in the short term.

08/08/2005 21:39:10   We believe that it is too early to tell. If many micro caps delist due to SOX, it will be their shareholders that will be most negatively affected. If the cost of compliance is too high, the unintended consequence of SOX will be that many shareholders will lose liquidity and in many cases value in their investments.

08/09/2005 09:30:31   See #2 above. By reducing shareholders you reduce interest in the stock. Increased expense, both in monetary and human capital required to manage SOX diminishes value of small companies.

08/09/2005 13:04:16   As it currently is written / applied, it has diminished the value of smaller companies due to the additional costs and personnel demands required to comply. Investors are not "flocking" to small caps because they feel more comfortable due to SOX.

08/09/2005 16:26:34   I do not believe there has been any enhanced value in banking unless there are small banks that had control issues not previously discoverd. There has been a marginal erosion of value due the costs and increased operations.

08/09/2005 17:25:10   As implied in 1, diminished as it takes precious resources away from enhancing profits. Smaller companies have very involved senior managers who watch the pennies. We see problems quickly and address them. SOX doesn't do anything to help us, nor do I beleive our shareholders want us spending time on form vs. substance. We know we have good controls and regular quarterly reviews and annual audit will catch materila errors in reporting.

08/10/2005 09:04:41   no comment

08/10/2005 13:44:39   A difinition of smaller company may be in order. Obviously with the accounting fraud and abuse of power at certain public companies, the public's trust and confidence has been shaken. So I think in the long run this should help the confidence in the markets. But this is mainly for publicly traded stock.

08/10/2005 16:00:18   Diminished!!! We're now spending our shareholders' money on SEC attorneys, compliance, 404, two audit firms, etc. We'd rather be giving the money back to our shareholders!

08/10/2005 17:18:15   It has diminished the value in the short term due to reduced earnings and distraction of management; for the long term, there will be enhanced value since reliance on the financials should increase.

08/10/2005 22:09:27   As I mentioned before, less risks, less rewards, less profits , exorbitant costs in relation to size, and less earnings. Lawyers and audit firms get richer without adding value to the company. In fact it seems it is in their best interest to have SOX as complicated as it is. Small companies cannot afford an attorney on the payroll so relience on outside counsel is a must and that comes with a very high price and gettin pricier all the time

08/11/2005 08:35:22   Enhanced in the long term as management is definitely more engaged in the evaluation of internal processes which will lead to improvements.

08/11/2005 20:27:22   Based on the cost and no benefit - most smaller companies are now worth much less than prior to SOX.

08/12/2005 13:12:10   See the above comment, and you will know that I believe that SOX may very well diminish that value. As a banker with 42 years of experience, I fully understand the value of regulatory oversight. However, I strongly believe that the heavy oversight that smaller bank companies like mine was not considered on the front-end of SOX.

08/12/2005 14:46:45   Merchants Bank had a very strong risk management program in place prior to SOX 404. An incredible number of hours were spent repopulating and restructuring documentation for SOX 404 purposes.

08/12/2005 16:35:01   Diminished. If for no other reasons, the cost of implementing SOX reduces cash flow and, in turn, the value of our company.

08/12/2005 18:34:31   Currently, the answer is diminished. Much of SOX is burdensome bureacary added to already lean staffs. There is some true value to adding formality and accountability to small company goverance which could be gained, long term, if some reasonableness could be added to the process to wean out the unnecessary structure.

08/13/2005 12:39:43   DON'T KNOW

08/15/2005 13:08:27   Clearly diminished. SOX adds significant burdens with limited benefits. It's unlikely that the provisions of SOX would have prevented the situations that caused it to be enacted.

08/15/2005 14:27:30   In the long term, I doubt it will have much effect either way. In the short term, it has diminished value because of the time and money cost associated with the transition (see 404 comments below.)

08/15/2005 14:33:20   Diminished becasue small companies are better controlled

08/15/2005 15:10:05   It can enhance the value if done well and if a common sense approach is used by management and auditors. There's a difference between being a small family run business where the owner can do as he/she pleases with their own money and a small company being a steward for other shareholder's money.

08/15/2005 15:13:01   SOX has diminished the value of small cap companies. Our company currently trades at 6X trailing 12 EBITDA, and has throughout most of its history. Considering that we spent $2 million in the trailing 12 months on SOX, that equates to $12 million of market cap. There is no way that investors have rewarded this company a like amount for our clean SOX opinion. This point is also shared with each of our institutional shareholders who I have questioned.

08/15/2005 15:14:45   If the value of any company is on a P/E ratio basis, then the values have been diminished, since earnings have been negatively impacted.

08/15/2005 16:33:43   Diminished- the amount of work required for a company like Seneca with 28 plants and warehouses to pay auditors to confirm our routine processes is beyond all logic.

08/15/2005 16:41:14   May have enhanced it; but very difficult to quantify.

08/16/2005 09:51:21   No change

08/16/2005 10:10:36   Diminished the value. The % of operating profit to become and maintain SOX compliant is disproportionately large compared to operating profit.

08/16/2005 10:13:05   Diminished. Expenses incurred to comply with SOX has diminished the profitability of smaller companies with no corresponding added value.

08/16/2005 10:21:17   Slightly enhanced.

08/16/2005 10:26:28   enhanced confidence for investors offset by extra cost and time spent on compliance rather than other priorities

08/16/2005 10:27:48   I personally don't see any possible enhancement in value. SOX is placing an expectation on these companies, that offers no upside potential. If there was an opt in or out provision, then you have at least some potential in valuations, however, as structured there can be no enhanced value. There is, however, enhanced value to consulting and accounting firms!

08/16/2005 10:42:02   Diminished. The ratio of SOX costs to earnings is significantly higher for small companies, thus disproportionately lowering earnings and resultant valuations.

08/16/2005 10:44:16   I think we have spent an extraordinary amount of money with very questionable pay back. We were control conscious to begin with so while the documentation of our controls has improved, I am not certain the controls themselves have improved significantly.

08/16/2005 10:45:16   has diminshed earnings per share

08/16/2005 11:18:54   I believe it has diminished the value of smaller companies for the reasons previously stated, there is a signifiant cost with no revenue associated with it. As a small company with no analyst coverage, there is no market premium paid for having a clean Sox report. There is only the possibility of being penalized if a problem is disclosed.

08/16/2005 11:41:07   Diminished. Accounting costs are now up to 1/2% of revenue. The business moves slower.

08/16/2005 11:52:16   I believe it has taken money out of the companies which could have been used to grow the companies. I have seen very little improvement in anything since SOX - in otherwords the shareholders are not getting their money's worth.

08/16/2005 12:14:10   Certainly diminished, the cost for a small company is a large percentage of revenue.

08/16/2005 12:15:34   In our case, it has diminished the value due to extra expenses and lower income. I have been the Controller for 9 years and we have never had a mention of any internal control issue from our outside auditors. Yet, I am now required to put the SOX systems into place, spend a lot of money and time doing it, and it will do nothing to change the accuracy of our financial results.

08/16/2005 12:40:54   Diminished by greatly increasing costs for little enhanced value.

08/16/2005 12:42:56   We have been told that our market cap is likely to be materially impaired because of the significant EPS hit that SOX costs impose on our earnings.

08/16/2005 13:04:14   Clearly diminished the value of smaller companies. The cost of compliance will far exceed the gains from any improvements in internal control. Smaller companies need to have alternative means of internal control since they must work with fewer accounting and financial executives.

08/16/2005 13:12:04   Lowered. Just do the math... EPS down due to extra cost burden of SOX and that via PE ratio translates to lower shareholder value.

08/16/2005 13:19:29   I cannot speak for all smaller companies, but in our case it has diminished our value in the most basic of senses. To do our annual filing this year we were forced to spend approximately 1/4 of our total net income for the year between additional CPA and attorney fees. As such, our profitability has been significantly impacted.

08/16/2005 13:20:23   At a macro level, it has enhanced the value of smaller companies because it has forced better practices, and a more rigorous evaluation of their processes and controls, ultimately resulting in better quality accounting practices and reporting, despite higher than expected costs to implement. The cost issue is as much a function of poor implementation and guidance for public accounting firms though and lack of effort and commitment by smaller firms.

08/16/2005 13:25:32   I believe that SOX has diminished the collective value of all public US corporations, by adding billions in costs that hurt our competitiveness and focus.

08/16/2005 13:27:00   Diminished. The significant cost (both money and time) has had a negative impact on the ability of smaller companies to compete. While all companies incur more cost, larger companies have the benefit of economies of scale. SOX just adds to the disadvantage for smaller companies. In addition, it makes it more difficult for American companies to compete in a global economy; Japan, China, and Germany don't have the burden of SOX.

08/16/2005 13:30:33   Diminished. It is far to expensive to comply with these rules.

08/16/2005 14:08:05   I believe that SOX has diminished the value of smaller companies. The costs of SOX are substantial, and in some cases, result in companies being unprofitable when they otherwise would be profitable due to the increased costs associated with accounting issues.

08/16/2005 14:23:10   SOX has proportionatly placed a higher burden on small and medium size companies. The increased audit and compliance cost as a percentage of sales and earnings is significantly higher for smaller companies.

08/16/2005 14:44:16   SOX has only diminished the value. It reduced the net income and did not increase in return any value.

08/16/2005 15:15:12   I believe SOX has diminished the value of the small companies. This added regulatory burden is both expensive and time consuming and the value to the small company investor is minimal.

08/16/2005 16:08:50   There is value in SOX, but the cost outweighs the benefits.

08/16/2005 16:09:47   For the most part it has diminished the value of smaller companies by forcing them to divert critical resources away from productive activities to focus on reporting; mostly just for the sake of meeting a government mandate (i.e. adds nothing to the bottom line).

08/16/2005 16:16:04   It will enhance the confidence in controls but at a cost to wipe out potential profits and force the Company to finance the costs of this compliance. This will increase corporate debt and focus management on issues other than the business.

08/16/2005 16:45:09   Clearly has diminished the value. Focus has changed from building the company to compliance.

08/16/2005 18:21:27   DEFINITELY DIMINISHED!!! The cost of implementation for a set of rules which would not have prevented an Enron or WorldCom comes nowhere near providing value in excess of cost!

08/16/2005 18:35:41   Diminished due to the deadweight cost of compliance and in the significant diversion of management attention to SOX 404 compliance. By "management" I am including the middle management people who are the "subject matter experts" in control processes and are also the managers on whom the company depends heavily to manage expansion and new business efforts.

08/16/2005 19:18:56   I believe that SOX has diminished the value of smaller companies. As I said in no. 1 above, the costs of initial and continuing compliance are prohibitive and, I believe, in many (if not most) small companies those costs are a measurable percentage of operating and net income. Therefore, under any financial measure or valuation model, a small company will not perform as well with SOX costs, as without. I do not believe that the market recognizes the benefits of SOX compliance in its valuations of smaller companies. Maybe it is better said that the benefits of SOX compliance do not translate into higher valuations.

08/16/2005 21:29:07   Diminished - see 2.

08/16/2005 21:40:38   Diminished. Distraction, increased expense, focus on non-value added bureacracy.

08/17/2005 06:57:10   I do not believe that SOX has enhanced the value of smaller companies. The cost of compliance is effectively a corporate "tax" levied on public company and hurts the smaller companies disportionately.

08/17/2005 10:59:57   Diminished shareholder value as mentioned above.

08/17/2005 12:28:22   Ses above

08/17/2005 12:36:00   As a bank holding company, we have always been regulated to a high level. SOX is additional regulation, in some cases duplicative, but for the most part adds little in my view. Due to its cost, I believe its greately diminished the value of companies in our industry.

08/17/2005 12:48:33   Diminished because of non productive use of limited funds.

08/17/2005 13:25:50   The value had decreased as a result of increased audit costs.

08/17/2005 16:18:39   SOX has diminished the value of smaller publicly traded companies because those companies are forced to incur significant costs for the extensive documentation and testing required by SOX, and there is very little perceived value received as a result of those costs. And this doesn't even consider the extensive diversion of management time towards SOX compliance - time which would be much better spent driving revenues or reducing operating costs. We waste time creating memos to prove we analyzed an issue, writing minutes of meetings to prove there was actually a meeting held, etc etc. What's the value of all this paperwork to a stockholder?

08/17/2005 18:49:20   In the long run, it will enhance value since there is a simple maxim - better financial controls will result in a greater level of profitability. Too many smaller companies experience higher costs when controls are missing and too many mistakes are made and not caught. Secondly, a smaller company examining its controls is more likely to evaluate the overall effectiveness of its business processes as well which far too many companies do not do resulting in inflated process costs as well.

08/17/2005 18:49:27   The costs greatly outweigh the benefits. Do you have any evidence that investors perceive a benefit THEY ARE WILLING TO PAY FOR in SOX?

08/17/2005 19:31:08   I believe SOX has diminished the value of smaller companies by reducing the earnings stream. Our compliance cost as a percentage of sales is much greater than large businesses.

08/17/2005 21:27:12   Somewhat diminsished due to the costs of implementation.

08/17/2005 22:55:14   I believe it has diminished the value of smaller companies by increasing compliance expenses substantially, if the companies are public, and if they are private, increasing the costs of going public and therefore, reducing values for the acquisition alternative.

08/18/2005 08:03:31   It damaged small companies

08/18/2005 15:26:25   The risk of fraud is generally greater at larger companies, even though their controls may be more formalized and sophisticated, due to de-centralization of authority and disparate management. Smaller companies are generally more risk due to the greater volatility in earnings, therefore being SOX 404 compliant is unlikely to make smaller companies more valuable

08/19/2005 02:56:12   Probably no change. Shareholders either have confidence in management or they don't. Well run companies with solid transparent disclosures, such as ours, are well respected and properly valued regardless of SOX. The tone at the top is easilly discernable by investors.

08/19/2005 11:44:44   If anything it has probably diminished the value slightly, due to increased expenses as well as decreased productivity of company staff.

08/19/2005 12:28:03   Long term enhancement, short term diminished. Well run and managed companies well see enhanced value. The short term implications of compliance costs will be very burdensome and have a larger impact on profitability percentages than on larger companies.

08/19/2005 13:49:01   The value of smaller companies has been diminished as a result of SOX since, as a result of the cost of SOX compliance, the returns to be derived from smaller companies has been greatly reduced; there is less enticement to become involved with a smaller company if a known cost of operations is aimed at maintaining regulatory compliance.

08/19/2005 14:40:28   In the short-term, SOX will cause smaller public companies to appear less profitable due to incremental compliance costs that will be required. In the long-term, through remediation efforts, smaller public companies will build a corporate infrastructure that will ease future business expansion through more efficient IT systems, more stream-lined, efficient back office processes.

08/19/2005 14:50:07   I believe it has diminished the value of small companies, particularly community banks and thrifts which are already heavily regulated.

08/19/2005 17:03:28   Keeping small private companies from going public may actually enhance the value since current shareholders will not have to bear the burden of SOX after it goes public.

08/21/2005 03:34:34   I believe it diminished the value of smaller companies, which instead of being focused on improving their companies, develop more and sell more, are now more occupied in procedures, processes and managements are not ready to take calculated risks which are part of every business.

08/21/2005 04:46:26   Diminished : Board and management attention moving from startegy and opportunities to procedures. 1M$ out of pocket expense , another similar increase in expenses internally. procedures.

08/21/2005 22:19:50   Both. It has enhanced value by forcing smaller companies to spend money to improve corporate governance, but diminished the value because a smaller company needs the capital it has to grow and reinvest in its business. The money it spends on compliance has certainly reduced it return to shareholders.

08/22/2005 14:21:23   Small companies don't have the ability to hide fraud as in larger organizations. We are too open due to fewer people involved, therefore it has not added any value and may have taken away due to increased costs.

08/22/2005 15:20:23   Diminished because of the cost of implementing Rule 404. I believe that most of the issues that preempted SOX occurred at the top of the organization. Rule 404 focuses more at lower levels. It is difficult to put controls at the CFO in a small company, because there is a lack of depth of expertise in a small company. For example, the accounting function may consist of the CFO and a bookkeeper. The bookkeeper may not have enough expertise to leverage controls over the CFO's work. Therefore the CFO will often have the ability to write checks, post journal entries, etc. For small companies, I believe the most effective part of SOX is Section 302 and the threat of accountability for wrong doing.

08/22/2005 15:47:02   Diminished, simply because of the cost of compliance.

08/22/2005 15:47:34   Diminished. SOX is a "real" expense. Any enhancement to value is only "perceived". Any enhancement would have been realized already as a benefit to the market as a whole. However, as it relates to a specific company the market only rewards growth and bottom line. Anything that negatively impacts the bottom line has a real and immediate impact to valve as measured by the share price.

08/22/2005 17:54:28   SOX has diminished the value of smaller companies, because the costs and risks caused by SOX represent a relatively higher percentage of the value of the company compared to a larger enterprise.

08/22/2005 17:56:59   Diminished

08/22/2005 19:27:18   Dimished. The money would be better spent on R&D.

08/22/2005 20:10:17   SOX has diminished the value as it has affected profitability (in increasing accounting costs) and will ultimately damage shareholders as small companies are unable to remain attractive to shareholders. Share prices will be down and trading volume will be down.

08/23/2005 00:42:38   diminished. no change in the level or accuracy of information. just added cost and distraction of employees, management, board of directors. Sox has created on environment of form over substance.

08/23/2005 07:47:56   Sox diminished part of the value of small compnies it prvent them from moving faster

08/23/2005 09:50:27   I believe it has diminished the value due to the high costs incurred for audit and filing costs.

08/23/2005 15:56:30   Diminished. The cost to comply is disproportionately high for smaller companies which dimishes competetive advantage. Manpower is focused on compliance rather than effective business management

08/23/2005 16:49:34   It may help some and hurt others. There are some good things about the act that could help some companies develop better mgt. controls. However, the cost may outweigh the benefit to some.

08/23/2005 18:10:00   NPV of future cash flow streams are reduced by compliance costs of 404 and independent audits. Yet to be determined if benefits from improved controls will outweigh our costs.

08/23/2005 21:11:03   A significant portion of smaller companies have lost analyst coverage in recent years. As a result many are trading at discounted multiples. The significant burden of SOX compliance, especially section 404, will further exacerbate this problem and overall diminsh the value of smaller companies.

08/24/2005 08:50:18   Personally, as Director of Internal Audit, it should be enhanced somewhat, but I don't believe the public perception holds the same (particularly if a material weakness arises from staffing issues, seg of duties violations, etc)

08/24/2005 10:14:02   Diminshed. Expense of compliance outweighs potential benefits to shareholders for small cap and OTCBB companies.

08/24/2005 11:28:21   I believe it has diminished the value of smaller companies as the costs of compliance far outweighs any increase in operating efficiencies or increased valuation multiples. Even a private company is impacted by SOX since the costs of our annual audit (performed by a Big 4 firm) has more than doubled in the last 2 years.

08/24/2005 12:24:07   The costs have, in general, outweighed the benefits. It is definitely possible to attain the increased quality of controls without requiring a redundant audit function.

08/24/2005 14:30:13   I don't think it has changed the value of smaller companies or the value of many companies unless there are significant deficiencies and/or material weaknesses.

08/24/2005 16:19:27   Diminished. We don't have the resources of larger companies and we are forced to comply with legislation that we beleive adds very little value to our company. We use to feel free to discuss topics with our auditors because much of accounting is an art - and today no one wants to make a judgement call because of fear of accountability.

08/24/2005 16:26:56   We believe the value of smaller companies has been diminished due to the implementation and continuing costs of SOX (primarily section 404) being spread over a relatively smaller revenue base, as well as the diversion of management time, effort and focus. Although it may be argued that SOX 404 will result in greater confidence in the US public equity market and therefore a lower cost of capital, it is not clear that it will have the same result for smaller companies, and we believe that time spent on compliance takes away from management´s ability to identify and capitalize on opportunities.

08/24/2005 16:51:40   The cost of compliance is greater than the benefit. Moreover, the requirements for independent directors has frequently meant adding directors without an understanding of the Company. Smaller companies cannot pay what is required to attract knowledgeable outside directors.

08/24/2005 16:54:47   Diminished, less profit due to extra SOX expenses

08/24/2005 20:16:09   Since the banking industry is so heavily regulated; and for us that means the FDIC, Federal Reserve, the State Regulators (we are state chartered)and the SEC, SOX did nothing to enhance the value of our company. It has put a HUGE burden on us fnancially and redirected our efforts and focus away from the business of banking to SOX compliance in order to meet the 2006 deadline.

08/25/2005 13:39:06   Diminished! BGF has incurred significant cost to implement SOX without any tangible benefits to our bottom line.

08/25/2005 15:23:41   Believe it has diminished, SOX is too expensive for the goal it is trying to achieve.

08/25/2005 16:04:36   SOX is still not understood on Wall Street, so the smaller companies have received a "perceived benefit" from the press that the larger companies received as they went through pains to become compliant with SOX. No news is good news.

08/25/2005 16:26:29   Diminished. The cost of compliance has diminished earnings and cash. In addition, the attention that has to be placed on SOX at the executive level is taking away from operating matters.

08/25/2005 17:02:43   I believe that SOX, at least temporarily, has diminished the perceived value of smaller companies as a development vehicle for investors and will ultimately stifle innovation if implemented with smaller companies on the same standard as larger companies.

08/26/2005 12:41:42   Clearly diminished. Shareholders are not sleeping better at night knowing that a company is SOX compliant, however, the cost is a large overhang on small companies. Shareholders have to wonder how management and the Board is going to respond.

08/26/2005 13:07:22   The cost of compliance has assuredly impaired the ability of small companies to pay the dividends they might otherwise have paid. Further, anyone buying a small company must consider the cost of compliance in determining a purchase price.

08/26/2005 15:10:01   Diminished. Simple math and business education reveals the expense of SOX has no returns, since the controls are already in place and would only be duplicated. Also, when considering the size of our company, the costs takes a sizable chunk out of our total value to shareholders.

08/26/2005 15:31:29   If the information derived from Sarbanes-Oxley is used in the proper "Spirit", there is added value.

08/26/2005 16:22:08   No.

08/26/2005 17:46:13   SOX has undoubtedly diminished the value of smaller companies.

08/26/2005 19:53:54   It has significantly diminished the value due to the exorbitant costs and effort necessry to compy. Shareholders are losing value.

08/27/2005 11:21:03   Neither. It makes compliance cost much more, but adds no value because it hasn't changed the quality of reporting.

08/28/2005 17:59:58   The cost of SOX for a smaller company is disproportional to all other elements of our P&L. It is very difficult to derive a satisfactory cost/benefit relationship.

08/28/2005 23:37:43   Diminished the value. I believe a current theme of privatization via private capital placements is well underway. A private equity fund, for example, as a major investor, will merely place a principal on the Board of subject firm, and insist upon an audited financial statement. This form of control is far less expensive.

08/29/2005 07:07:37   If at all - diminished, due to unnecessary, mostly, burden on management and BOD.

08/29/2005 10:21:15   Taken as a whole, due primarily to the costly effects of 404, we believe it has diminished their value due to the fact that it places “mega-company” legislation on everyone. As such, the cost for a small company to create an ideal internal control environment, with full in-house gaap and tax expertise as well as segregation of duties and testing bodies, is enormous in comparison to revenue and net income. This could lead to future reductions in competition in certain industries where new companies choose not to enter given the high regulatory burden, thus leaving only mega companies.

08/29/2005 10:21:25   Taken as a whole, due primarily to the costly effects of 404, we believe it has diminished their value due to the fact that it places “mega-company” legislation on everyone. As such, the cost for a small company to create an ideal internal control environment, with full in-house gaap and tax expertise as well as segregation of duties and testing bodies, is enormous in comparison to revenue and net income. This could lead to future reductions in competition in certain industries where new companies choose not to enter given the high regulatory burden, thus leaving only mega companies.

08/29/2005 11:21:29   The costs far outweigh the benefits, thus reducing shareholder value. The sins of a few large companies have really hit small companies hard. Now small companies are using more of its resources to comply with regulation instead of servicing customers. Some of this cost is sent to the customers.

08/29/2005 14:18:47   I believe that SOX has enhanced the value of smaller companies. The urge to grow is strong in all companies, perhaps strongest at small firms. Managerial concentration on infrastructure and accounting controls can take a backseat to the emphasis on growth, whether by through the existing asset base or through acquisition. One needs only to scan the SEC´s Accounting & Auditing Enforcement Releases to find examples of small firms where controls were given a low managerial priority relative to growth and “making the numbers.” SOX has been a major sobering-up for many firms who are now confronted with establishing and documenting controls required to have been in place at least since the Foreign Corrupt Practices Act of 1977. Getting these controls in order is an activity that should improve the value of smaller companies in ways that are less obvious than hell-bent-for-leather growth.

08/29/2005 14:53:30   Diminished. I know of no constructive benefit to either the company or to its shareholders that compliance with Sarbanes-Oxley has caused. Companies already complied with all accounting rules and regulations as attested to by their independent auditors before the enactment of SOX.

08/29/2005 15:31:21   In the shortrun, I believe that SOX has diminished the value of small companies because of the increased costs of implementation and administration.

08/29/2005 16:10:53   Diminished---

08/29/2005 16:20:53   Diminshed, because increased costs have affected bottom lines and taken management away from other duties.

08/29/2005 17:09:27   For small companies, the benefit of SOX is not cost-justified, and value is diminished. The added costs have a larger relative affect on smaller companies with fewer resources.

08/29/2005 17:12:26   I think it depends. Some companies may feel overwhelemed somewhat and consider selling the company as a strategy. This however could create opportunities for those companies who feel more comfortable with dealing with the added compliance burden and could have buying opportunities.

08/29/2005 17:12:43   It has given little comfort to investors and has disproportionately hurt smaller companies due to increased costs to comply. Lower revenue/size does not always translate into less complexity and most smaller public companies do not have the internal resources to handle the initial SOX effort or ongoing SOX efforts.

08/29/2005 17:36:32   Diminished. The cost of compliance has sucked all the profit out of what was otherwise a profitable company.

08/29/2005 19:02:32   It has had no effect except to damage earnings.

08/29/2005 19:05:24   SOX has diminished the value of smaller companies. For smaller companies, the incremental cash cost of compliance is material to both net income and operating cash flow. These cash costs, which are easily measured, far outweigh the intangible benefits provided by compliance with SOX 404. Value maximization may require that smaller companies delist and go private.

08/29/2005 21:00:01   I believe SOX has extremely diminished the value of smaller companies. Both from the cost perspective as well as the effectiveness. A smaller company can have close to the same SOX costs as a larger company, sometimes more, yet the risks associated with a smaller company are usually far less than the larger company. In addition, a smaller company has less employees and less ability to administer the additional SOX requirements.

08/29/2005 22:40:58   Diminished the value, based on high compliance costs and lower earnings per share.

08/30/2005 15:04:16   SOX has severely diminished the value of small public companies. The basic premise of SOX - to assure sound management practices and controls - is sound. However, these principles should not be legislated. The free market system should reward good practice and will punish bad practice. SOX has severely diminished the value of small companies because scarce dollars (cash) must be re-deployed for compliance activities and increased auditing expense management time and attention has been required to re-focus - "to an extreme".

08/30/2005 15:07:00   SOX has diminished the value of smaller companies as it has impacted earnings generally fairly significantly.

08/30/2005 16:27:18   Diminished. The cost of SOX has disproportionately reduced the net worth of small companies.

08/30/2005 17:08:46   Believe that SOX has diminished the value of smaller companies because the cost of compliance (for smaller companies in particular) far outweighs any benefits that may result from SOX. It is also difficult to identify and measure such benefits.

08/30/2005 17:23:36   I believe SOX has diminished the value of being a small public company. We have a complete staff of 40 employees, production & office staff. I think too much of our resources have been taken up by SOX regulations. The cost of compliance has been very high.

08/30/2005 18:26:14   Smaller companies, traditionally leaders in innovation and often times entrepreneurs, have been suppressed by the formalistic requirements of SOX compliance. Additionally, costs and resources are being spent on procedures that add little or no value to the company. Any benefit to the company has been significantly outweighed by the excessive costs of compliance.

08/30/2005 18:48:02   Diminished. The cost of SOX takes a chunk out of a small company's budget, affecting the bottom line and leaving less for product development.

08/30/2005 18:51:48   We believe that SOX has diminished the value of smaller companies. We do believe that although we have an adequate system of internal controls in place, our system is informal. The costs of documenting and formalizing all of our controls, coupled with the costs of additional personnel required to achieve an adequate segregation of duties and perform double checks on these controls will be significant with little added benefit realized.

08/30/2005 19:47:16   Clearly, SOX has diminished the value of smaller companies by redirecting the time, energy, cash and other of the firm's resources to understand and comply with a complex series of rules that are "overkill" for small public companies with minimal staff, relatively simple, straight-forward accounting issues and limited resources. Trying to overlay the SOX framework onto these companies suffocates them. Since small business contribute significantly to job creation, SOX has an extremely negative effect on their ability to act as incubators for innovative new products and technologies.

08/30/2005 21:07:56   Dminished. Funds and energy is being spent on compliance vs the core business.

08/30/2005 21:39:41   We believe that SOX has significantly diminished value of most smaller companies given extremely high cost of compliance with limited direct benefit.

08/30/2005 23:57:28   SOX is diminshed the value of smaller companies. Small company is much easy to control by management due to their size and scales. Again, resource are limited for small company, if significant amount is spend on SOX, it will slow down their growth or even create financial difficulty for them as working capital reduced.

08/31/2005 08:31:59   Diminished - the increased costs have a direct impact on the bottom line. I don't believe anyone takes into account that a company is SOX compliant before they buy the stock.

08/31/2005 09:09:25   Diminished. Market cap values have shrunk due to lower profits.

08/31/2005 10:19:14   SOX has diminished the value of smaller companies, because SOX compliance will cost a small company a minimum of $300,000 in additional accounting and consulting fees per year.

08/31/2005 10:21:37   A marginally diminished value due to cost of compliance.

08/31/2005 14:00:12   The cost in cash and management time of Section 404 compliance has outweighed any benefit and thus reduced values. The reminder of SOX provisions have had minimal impact.

08/31/2005 14:00:16   In my opinion, SOX does not enhance value of any company. SOX was created in reaction to Enron, MCI Worldcom and the like. What appears to have been forgotten is that ethics can't be regulated in any size company. It takes people to run companies. Ethical people, while not perfect, will attempt to "do it right" regardless of whether processes and controls are adequately documented or not. People who are determined to "beat the system" probably won't change their ways simply becuase the internal control system has been formally documented and tested. Stronger directors - avoiding CEO puppets - is a positive thing. But again, if the CEO influencing the board is legitimately trying to manage his company with high ethics and standards, the board members aren't going to feel pressure to be "yes men". CEO puppets are problems when the CEO is working on his own personal agenda.

08/31/2005 14:12:37   For the reasons noted in #1 and #2 above, we believe that SOX has diminished the value of smaller companies. The costs of complying with SOX 404 in particular are disproportionately larger for smaller companies, while the benefits are limited. Several published studies have concluded that the impact to a company´s stock price after the disclosure of a material weakness in internal controls over financial reporting has, on average, been insignificant. We believe this to be an indicator that investors are generally far more concerned about the historical and expected future operational results of a company, and far less concerned about internal control reporting matters. For small companies in particular, we believe that most investors are basing their decisions on growth strategies, product development, etc. and accept the related risks associated with investing in a smaller company, such as less rigorous internal controls as compared to a larger company.

08/31/2005 14:23:48   Diminished. Very expensive to get into compliance and maintain compliance.

08/31/2005 14:25:37   SOX has diminshed the small company. The cost is too great. We are having a wedge placed between executive management, audit committee and outside accountants, and shareholders.

08/31/2005 14:32:46   When looking at value, there are numerous factors that come into play. SOX compliance is just one of those factors, and I don't believe there has been a major effect on value, either positive or negative, at this point.

08/31/2005 15:19:27   Diminshed. The tremendous amount of additional overhead that is being incurred for SOX compliance is making smaller companies a less attractive investment. It also is distracting senior mgmt from their focus of growing the business.

08/31/2005 16:05:33   Diminished the value because of the legal and accounting expense which could otherwise be distrbuted to the shareholders in the form of distributions.

08/31/2005 16:13:45   The change in the value of smaller companies has been affected by the the decrease in earnings related to the costs and the lost opportunity cost of SOX.

08/31/2005 16:16:33   3. The net effect of SOX may not be determined for some time. The high cost and resource restraints of small companies have made it difficult in incorporating SOX compliance within their operations. However, there are certain higher risk areas associated with smaller companies compared to larger companies, and vice versa. Small companies´ higher risks include a lack of formal procedures, less resources (segregation of duties), and a corporate culture that generally includes the “small company” mentality. Time will determine the change in value of smaller companies resulting from SOX.

08/31/2005 16:29:59   Diminished as more of their percentage of net income goes to the cost of SOX requirements or suggestions. More directors, more compliance overhead.

08/31/2005 17:16:33   Sox has dimished our value or will diminish our value once we have to comply with section 404. We estimate that it will cost between 1.5 million and 2 million dollars to implement 404. That is 1.7 points carved out of our gross profit of 16%! That will definitely diminish our value.

08/31/2005 17:57:10   Diminished due to the additional significant cost involved.

08/31/2005 18:22:30   Small companies have not yet fully experienced 404, so we do not believe it has had a meaningful impact on them yet. However, the value of smaller companies will likely be diminished when they incur the cost of compliance with 404. We do believe it has increased the cost of public capital, while at the same time private capital (largely through private equity groups) is much more available. As a result, smaller companies have less pressure to register as early as they have in the past and are able to meet their capital needs in the private market.

08/31/2005 18:23:08   SOX has diminished the value of smaller companies because the excessive expense (as a % of sales) related to SOX was incurred without realizing an equal or greater benefit near or longer term. Investors understand that investing in smaller companies is inherently more risky (business risk, not necessarily internal control risk) than investing in larger companies; therefore the additional costs reduce the value. Plus less time is spent on operational improvements, again those processes bringing value to the bottom line, which would bring value to the shareholder.

08/31/2005 19:16:05   3. Since we have incurred very little of the potential compliance costs to date, there has been very little impact on the value of the company. We do expect that the increased costs of a true compliance effort would impact both near-term value due to lower profits and long-term value due to lost resources in time and dollars that would have allowed the company to grow at a higher rate.

08/31/2005 20:55:07   No major impact yet but it will when all small companies get into compliance. It will definitely be a major negative as stated in item 2 above.

09/01/2005 11:40:19   Diminished, the rules apply the same to a small company with no internal audit function compared to a large company with full documented processes and a large internal audit team. The cost to get up and running to a smaller company in internal staffing and consulting is so much larger in comparison to impact than what larger companies had to undertake. As there are usually significantly less employees and management in a smaller company, there is more time as a percentage focused on 404 instead of running the business.

09/01/2005 14:30:54   The value of smaller companies has been diminished by imposing unnecessary costs and diverting management time and energy. Top management now has to spend more time on personal protection from inadvertent errors of lower management.

09/01/2005 17:12:34   Significantly diminished. It hurts profitablility significantly and therefore competitiveness and ultimately valuation. High compliance costs and audit fees are counter productive. The Enron's and Worldcom's were the exception and were frauds that occurred at the highest levels of those corporations. The general control environment, whistle blowing laws and possibily internal audit requirements would be much more effective than SOX in detering or finding such frauds. Small companies are being burdened with a law that may have supported the capital markets at the right time but is ill conceived to truely solve the problems that inititated the legislation.

09/04/2005 07:42:16   Yes - compliance with sox require heavy expenses that are more meaningful to small companies and significantly affect its Earnings per share.

All Survey
Main Survey



Modified: 10/13/2005