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Software // Information Management

SOX Is Wearing Everyone

Smaller companies still have to comply with the law.

The Securities and Exchange Commission (SEC) will continue to require small public companies (whose market value is less than $128 million) to comply with the Sarbanes-Oxley Act and companies valued between $128 and $700 million to continue having their internal controls audited. Last December an advisory group endorsed eliminating these requirements because of their high cost. The SEC appears to be steering a middle course as it looks for ways to cut the cost of compliance while still requiring all public companies to comply.

The decision keeps these smaller companies on the hook for demonstrating that their financial statements and external reporting systems are controlled. No doubt, compliance requirements will deter many smaller companies from going public (which may not be a bad thing, by the way). For those already public, the cost of compliance is pure overhead and therefore provides an incentive to merge or go private. However, most of these companies are stuck: They will be unable to raise the funds to go private or find a suitable merger partner at a suitable price.

Ventana Research thinks it is even more important for smaller public companies to look for ways to address the root causes of inefficiencies in their finance processes (for example, manual systems, undocumented processes or excessive use of spreadsheets). In our experience, addressing such issues is likely to enhance a company's financial control structure and reduce the cost of Sarbanes-Oxley compliance.

About Ventana Research
Ventana Research is the leading Performance Management research and advisory services firm. By providing expert insight and detailed guidance, Ventana Research helps clients operate their companies more efficiently and effectively. These business improvements are delivered through a top-down approach that connects people, process, information and technology. What makes Ventana Research different from other analyst firms is a focus on Performance Management for finance, operations and IT. This focus, plus research as a foundation and reach into a community of over two million corporate executives through extensive media partnerships, allows Ventana Research to deliver a high-value, low-risk method for achieving optimal business performance. To learn how Ventana Research Performance Management workshops, assessments and advisory services can impact your bottom line, visit
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