As, I suspect is the case for most of my readers, High School seems a very time ago.
I attended a now defunct institution – High Pavement Grammar in Nottingham, England. Founded in the 18th century it remained largely below the world’s radar screen until the conviction of alumnus Dr Harold Shipman. He notoriously broke with school tradition – motto "Virtus Sola Nobilitas” (Virtue is the only Nobility) – and more importantly with his Hippocratic Oath to become Britain’s top serial murderer by bumping off at least 200 of his elderly patients.
Although Shipman and I were there at the same time, he was 5 years older and so I guess I was too young to attract his developing geriatricidal attention.
However it’s likely that we did share the eccentric Drama teacher – Bert Brown – whose singular belief was that the system needed to be brought down – and at any cost.
As part of his lifelong campaign to develop an army dedicated to his cause, Bert taught us boys about philosophy, communism, anarchy and reinforced our budding revolutionary zeal by taking us to see seditious plays by men like Chekhov, Gorki and the like.
High on Bert’s list of must see plays was Waiting for Godot. Back then it was pretty avant-garde although now it has gone the way of all flesh and joined the mainstream. In it, five characters engage in apparently meaningless discussions while awaiting the arrival of the play’s eponymous figure – Godot – who never arrives.
Written by Samuel Beckett it was a prime example of the Theatre of the Absurd, a genre which Wikipedia describes as follows:
“Time, place and identity are ambiguous and fluid, and even basic causality frequently breaks down. Meaningless plots, repetitive or nonsensical dialogue and dramatic non-sequiturs are often used to create dream-like, or even nightmare-like moods.”
And for tech company leaders who are contemplating a Nasdaq float, I can guarantee that a world where everything is ambiguous, meaningless, repetitive or nonsensical will seem horribly familiar!
For example, just last month the WSJ carried a headline announcing a loosening of the SoX strictures “Sarbanes-Oxley Is Eased”
In the generally upbeat article, SEC Chairman Christopher Cox said the guidance
"is intended to right-size the evaluation and assessment efforts of managements, and it's intended to do that for companies of all sizes,". "Investors will benefit from reduced compliance costs."
The article went on to pray that:
“Regulators hope the management guidance and a companion measure that is expected to be approved by the Public Company Accounting Oversight Board today will reduce costs enough that they will at last feel comfortable requiring smaller public companies to comply with the internal-controls provision of the 2002 law.”
And exotically named SEC deputy chief accountant Zoe-Vonna Palmrose positively trilled:
“We do believe that it’s not only doable for smaller companies, but doable in 2007.”
Never mind the trill - the thrill didn’t last long.
On the same day, Senators Kerry and Snowe read a very different conclusion in the SEC’s smoke and the PCAOB’s silence.
In a joint press release the Chairman and Ranking Member of the Committee on Small Business and Entrepreneurship voiced:
“strong concern that the Securities and Exchange Commission (SEC) failed to provide an extension for small public companies to comply with Sarbanes-Oxley internal control regulations.”
More depressingly for business leaders but not at all of course for accountants and other fans of the Theatre of the Absurd, the Senators' release went on to point out that:
“According to a recent Government Accountability Office study, small public companies spend a disproportionately greater amount of time and money to comply with Sarbanes-Oxley regulations than large public companies. Firms worth $1 billion or more spend just 13 cents per $100 in revenue for audit fees, while small businesses are forced to spend more than $1 to comply with the same rules.”
Yes - small business spend $1 in evry $100 to meet compliance regulations!
The absurdity of this situation was reinforced by National Venture Capital Association (NVCA) President Mark Heesen who claimed in their release with the following headline:
“National Venture Capital Association Warns Congress that SEC and PCAOB SOX Reform Proposals Do Not Go Far Enough Venture Industry Cites Lack of Effort by Auditors to Reduce Costs”
"First, we are gravely concerned that the accounting profession will not change its high cost practices and the recent guidance provided by both the SEC and the PCAOB regarding materiality is not specific enough to compel them to do so," Mr. Heesen testified. "Second, the oligopoly that exists for 404 audits leaves no choice for small companies in terms of service providers. It does not provide any incentive for the Big 4 accounting firms to lower costs. Lastly, because of these first two concerns, it is imperative that prior to adoption, all proposed measures are fully field tested to confirm that they will indeed reduce costs."
All of which fell on deaf SEC ears as reported in the Deal with the headline
Cox Defends SOX for Small Firms, Donna Block wrote:
“Despite persistent criticism from top lawmakers and advocacy groups, Securities and Exchange Commission Chairman Christopher Cox is standing by his agency's decision to make small businesses begin complying this summer with the most controversial provision of the 2002 Sarbanes-Oxley law.“
(By the way, Bert would have given me bonus marks at school for including Cox, Block and Sox in the same sentence - ah the advantages of a classical education!)
So while non-US companies avoid having to pay anything for controls assurance, US public companies are massivley undermining their competitive position by paying a tax 1% of revenues for the privilege!
And if you don’t believe me or even the bi-partisan Senators Kerry and Snowe, check out the tear-jerking WSJ piece by Ken Wilcox - president and CEO of Nasdaq listed SVB Financial Group (SIVB) in which he laments:
“In 2006 we paid over $20 million to the Big Four for an average of about $17,000 per employee. This is more than five times as much as we paid them only three years ago.”
In Beckett’s play, the five characters - Vladimir, Estragon, Pozzo, Lucky and the Boy - waited in vain for Godot.
The play closes with the Boy arriving to announce that yet again, Godot will not be coming; followed by Beckett’s much-quoted lines:
Vladimir: Well? Shall we go?
Estragon: Yes, let's go.
They do not move
And let's face it - for those once-meteoric US tech companies starved of growth capital, Godot isn’t coming either.
(Mind you, compared to paying $17,000 for Sarbanes Oxley compliance it’s not clear who are the unfortunate ones!)
I never thought, back in my teens with a world-class mass murderer of tomorrow sitting in a nearby classroom and Bert ranting about the absurdity of our existence that Art could ever prepare me for life!
But even such a robust a classical education leaves me unable to answer the award winning absurd question of the 21st Century US capital markets –
If Nasdaq isn’t coming – why does no one move?
Perhaps the answer lies in the definition of US Regulation, aka the Theatre of the Absurd:
“Time, place and identity are ambiguous and fluid, and even basic causality frequently breaks down. Meaningless plots, repetitive or nonsensical dialogue and dramatic non-sequiturs are often used to create dream-like, or even nightmare-like moods.”
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