Sarbanes-Oxley, A Bad Thing?

by Penny P
The author talks about the negative impact that the Sarbanes-Oxley Act of 2002 made on small firms. Dvorak starts out using Yahoo! as an example to explain why he believes “Sarbanes-Oxley sucks” (Dvorak).  He believes that if SOX became a law during the time that Yahoo! went public, Yahoo! would never have done so. Dvorak believes that Sarbanes-Oxley is a “ridiculous burden on smaller firms” (Dvorak).  He goes on to describe that these small companies can only do their best “when the original visionaries are…at the helm” (Dvorak). As soon as a bigger company eats the smaller company, that visionary may not be able to continue the work he/she had planned. Dvorak applauds Michael Dell because he is a visionary who still runs Dell.

Towards the end, Dvorak summarizes that many companies can’t “go public and get working capital” without a bigger company to buy and absorb them. Sometimes the position that the visionaries find themselves in is for the big companies to keep them on “as a slave” (Dvorak). His main point in this article is that SOX makes it difficult for “small innovative companies to float shares and get public funding” (Dvorak). He believes that repealing the Sarbanes-Oxley act will fix the problems.

I thought this article was interesting because I didn’t think that small companies would be affected like this. When I heard about the Sarbanes-Oxley Act of 2002, I thought it was a way to prevent scandals from occurring, like what had happened to Enron and several other companies. It seemed like a good thing to be able to ensure that big companies are not doing things that they are not supposed to do. But I guess I never thought about what would happen for the small companies.



Dvorak, J. (2011, September 13). PC Mag. Retrieved from,2817,2392925,00.asp.

5 thoughts on “Sarbanes-Oxley, A Bad Thing?”

  1. Interesting article, thanks for the summary! I think Sarbanes-Oxley Act is another one of those law that can have both positive and negative effect. The Act should have been made more specific, and that the levels of requirements for companies of different sizes should be different.The Act should be no problem for bigger companies, but for mid size companies, it should have less requirements, and for those start up companies, it should have the least.

  2. Very interesting article, I'd been running into SOX in almost every class I've taken this quarter but never really wondered how it affected small businesses. Both the article and blog post were helpful in explaining the relationship between SOX and small companies. For some reason Steve Jobs and Carl Karcher come to mind.

  3. interesting article. I had not really thought about how SOX would affect small business. Like Eric said, i think that SOX can have positive and negative affects. It keeps large scandals like enron from happening but like the article talks about, it stops a lot of small business from going public and getting the funding they need.

  4. I think that with every act or bill that is passed there are always going to be some cons. However, I think that SOX is more beneficial than it is harmful. It provides that companies fully disclose all information when required that are in accordance with GAAP. Investors will now be able to confidently invest and not be accused of fraudulent accounting activities. Corporation accountability and penalties for wrongdoings are enforced with SOX so that another Enron or WorldCom incident doesn't happen again.

  5. Agreed with Steven, I continuously see SOX in my classes. Having heard the application of it, I never envisioned a detriment to smaller organizations. I felt it had a main chunk with being transparent and allowing visibility to non-members of the organization. Definitely an interesting read!

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