Private Organizations Continue to Adopt Sarbanes-Oxley
Standards Despite Original Intention of Congress
CHICAGO, March 14 /PRNewswire/ -- Foley & Lardner LLP's third annual
national study, The Impact of Sarbanes-Oxley on Private & Nonprofit Companies,
reveals that private organizations are continuing to adopt aspects of the
Sarbanes-Oxley Act as a set of best practices, despite the fact Congress never
intended the Act to apply to non-public companies.
The study also shows that private organizations are consistently
self-imposing Sarbanes-Oxley standards and that nonprofit organizations have
been more aggressive in their adoption of corporate governance reforms than
their private for-profit counterparts.
"For the past three years, executives of private organizations have told
us that the standards outlined by Sarbanes-Oxley are being adopted as best
practices for a variety of reasons," explained Paul D. Broude, study director
and Foley partner. "Some organizations are feeling pressure from auditors or
board members to adopt these standards, while others are doing so in
anticipation of an upcoming IPO or sale.
"Regardless of their reasoning, one thing is clear: the time-consuming and
often costly provisions outlined by Sarbanes-Oxley are having an impact that
reaches far beyond public companies and into the private and nonprofit
sectors."
Private Organizations Have Reached "Steady State"
The study reveals substantial consistency in year-over-year results,
indicating that private organizations have reached a "steady state" and have
already implemented the aspects of corporate governance reform they intend to
adopt.
Among the findings:
-- 86% of survey respondents felt that SOX and other corporate governance
reform requirements have impacted their organizations, consistent with
the 87% who responded in this manner in 2005.
-- Private organizations continue to self-impose corporate governance
standards, but are also strongly influenced by their boards and outside
auditors.
-- Private companies tend to adopt the least expensive reforms, as opposed
to more costly initiatives such as Section 404 audits of internal
financial controls.
-- 84% of private organizations responding to the survey felt that
corporate governance reform is "about right," an increase in comparison
to 2005, when 78% responded in this manner.
-- Private organizations responding to our survey estimated an average
annual price tag of $105,000 for corporate governance procedures,
representing an estimated increase of approximately 26% over their
estimated costs prior to the enactment of the Sarbanes-Oxley Act.
Nonprofit Organizations Continue to Lead the Charge
Consistent with the study's findings in 2005, nonprofit organizations
continue to adopt more aspects of the Sarbanes-Oxley Act than for-profit
companies. Overall, nonprofits were more likely to have implemented or planned
to implement whistle-blower procedures, board approval of non-audit services
by auditors and restrictions on executive compensation, among other areas of
reform.
"In our view, this is a logical development because nonprofit
organizations have a greater number of stakeholders to whom they are
accountable, compared to for-profit organizations which are typically more
closely held," explained Broude.
Broude went on to explain that one reason for increased adoption among
nonprofit organizations could stem from the fact that a large number of
directors who sit on nonprofit boards also serve on the boards of public
companies. These directors are therefore more familiar with the Sarbanes-Oxley
Act and more likely to recommend adoption of similar governance policies by
nonprofits.
To download the complete report on the study, visit
http://www.foley.com/2006privatestudy.
Methodology
In January 2006, Foley & Lardner worked with research firm KRC Research to
facilitate and analyze the results of a national study designed to measure the
financial impact of corporate governance reform among private companies across
the country.
The Impact of Sarbanes-Oxley on Private & Nonprofit Companies provides a
window into the boardrooms of private organizations, illustrating how
corporate governance reform is affecting for-profit and nonprofit
organizations alike. Fifty-six private company surveys were completed by top
executives within these organizations, reflecting the input of 20 nonprofit
organizations and 36 for-profit private companies.
About Foley & Lardner
Foley & Lardner LLP provides the full range of corporate legal counsel.
Our attorneys understand today's most complex business areas, including
mergers and acquisitions, private equity and venture capital, life sciences,
emerging technologies, corporate governance, securities enforcement,
litigation, intellectual property, labor and employment, real estate and tax.
The firm offers total solutions in the nanotechnology, health care, e-business
and information technology, automotive, energy, entertainment and media, food,
golf and resort services, insurance, and sports industries.
SOURCE Foley & Lardner LLP
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Related links:
http://www.foley.com/2006privatestudy
CONTACT:
Jocelyn Brumbaugh, Media Relations Contact of
Foley & Lardner LLP, +1-312-832-4506; or Aaron Schoenherr, Media
Relations Contact of GreenTarget Global Group, +1-312-252-4103
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