Opinion: Helping small firms comply with Sarbanes Oxley is just good business
By SEN. John F. Kerry
We Americans pride ourselves on having the fairest, most transparent and most efficient financial markets in the world. We got there by developing a regulatory approach that insures investors around the world have confidence in our markets.
However, over the last few years, the actions of companies like Enron, WorldCom and Arthur Andersen shook the American people's faith in our financial markets.
In response, Congress took decisive steps to restore accountability to corporate governance, auditing, and financial reporting for public companies by passing the Sarbanes-Oxley Act of 2002.
But this success has come with a disproportionately heavy burden for our small businesses - the small companies that can't afford an army of accountants to help them wade through endless red tape. A recent Government Accountability Office study found that firms with assets over $1 billion spend just 13 cents per $100 in revenue on audit fees, while small businesses spend more than a dollar.
We need to assist small businesses, the backbone of the American economy, in making the transition to comply with Sarbanes-Oxley regulations. The U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) are currently considering final rules and guidance on implementing the law. I am hopeful that their changes will make compliance easier for small businesses. But above all, small companies need additional time to understand and implement the changes to Sarbanes-Oxley.
In February, I wrote a letter to the SEC and PCAOB with my colleague Sen. Olympia Snowe (R-Maine) urging them to give small businesses up to an additional year to comply with the upcoming changes to the Sarbanes-Oxley regulations.
As the chairman of the U.S. Senate's committee on small business and entrepreneurship, I held a hearing last week to examine how Sarbanes-Oxley impacts small public companies and to evaluate what we can do to help them comply. Thomas Venables, president and CEO of Benjamin Franklin Bank in Central Massachusetts, testified at the hearing that his bank incurred costs equal to six percent of annual earnings just to comply with the law. Joseph Piche, president and CEO of Eikos - a private, high tech company in Franklin, shared concerns about how the costs associated with Sarbanes-Oxley will affect the growth of high-technology companies in our state, including those not yet publicly traded.
As the federal regulators work to finalize the rules, they need to consider the comments and experiences of Mr. Venebles and Mr. Piche and the thousands of small businesses who will soon begin the process of implementing their decisions.
Small businesses didn't create the mess in our financial markets, but they're being asked to clean it up. I will continue to watch this process closely to ensure that even as we restore accountability and transparency, small businesses are able to focus on what they do best - creating jobs and expanding our economy.
John Kerry is a U.S. Senator from Massachusetts. He is also the chairman of the Senate's committee on small business and entrepreneurship.
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