Investors may question how often justice is done when it comes to companies playing fast and loose with their accounting, but the SEC does have a history of issuing fines in the tens of millions (and into the hundreds of millions) to those companies that are caught going too far. But what about the companies that do nothing wrong? (After the infamous collapse of companies like Tyco, Enron and WorldCom, the government responded to try and prevent it from happening again. To learn more, see How The Sarbanes-Oxley Era Affected IPOs.)
In the wake of the scandals that came out as the tech bubble collapsed, including the likes of Enron, Tyco, and Adelphia, Congress passed the Sarbanes-Oxley Act and demanded a higher standard of auditing and compliance from public companies. Now in the wake of the mortgage lending debacle that led to the credit crisis and recession, Congress has passed still more legislation aimed at improving company operations.
While these measures may be laudable in their efforts to improve reporting, increase transparency and hold company managers more responsible for how they run public companies, all of this comes at a cost. In the case of public companies, this is a very literal cost and it has had significant impacts on many segments of the stock market.
To read the complete column, click below:
http://financialedge.investopedia.com/financial-edge/0711/Compliance-The-Price-Companies-Pay.aspx
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