European Companies Grappling with SOX Compliance

Some European companies are wondering if the benefits of being listed on U.S. exchanges is worth the cost of Sarbanes-Oxley compliance, IT-Analysis.com reported.

With public and private companies alike struggling to comply with the rigid new requirements intended to improve transparency and accountability, international companies are weighing the pros and cons. Companies with 300 or more U.S. shareholders must comply with Sarbanes-Oxley.

According to PricewaterhouseCoopers estimates, there are 470 non-US companies listed on the New York Stock Exchange, with a combined market capitalization of $3.8 trillion-or 30 percent of the total value of capitalization of companies quoted on the exchange, IT-Analysis.com reported.

In the past, there were real benefits for international companies that listed their shares on U.S. stock exchanges. These included the appearance of being a strong international presence, access to a larger group of investors and easier access to potential acquisitions, IT-Analysis.com reported. However, the new rules could outweigh these benefits for some companies.

German chemicals producer BASF estimates that it is costing it anywhere between $30 million and $40 million per year owing to the costs involved in the extra burdens of Sarbanes-Oxley compliance, IT-Analysis.com reported. Rank Entertainment Group from the UK and British Telecom have also indicated they may de-list in the U.S.

Early estimates by the Financial Executives Institute put the cost of Sarbanes-Oxley compliance at about $2 million for individual companies. Experience quickly showed that figure to be closer to $3 million. Another estimate by Korn/Ferry places the tab at more like $5.1 million.

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