CFO Blog: Commentary and Opinion

Robert Pozen of MFS and Peter Lyons of Shearman & Sterling went on at length at the 404um on how the costs of compliance are discouraging foreign companies from raising capital in the U.S. Their contention is that investor confidence is so hard to quantify in comparison to the cost of compliance that such companies don't take seriously consider the possibility that the premium for listing their shares in the U.S. thanks to transparency, in the form of a higher P/E multiple, outweighs the hit from Sarbox to EPS. Both men, if I'm not mistaken, pronounced this rational but troubling. And they say it casts doubt on studies that suggest the premium is significant.

Balderdash, said former U.S. Comptroller General Charles Bowsher, or words to that effect. Observed Bowsher: "I’ve been working with foreign companies for 50 year and every time we have a reform, they’ve thought we’d gone overboard. They’d say, 'The one thing we never want to have (in their countries) was an SEC.' Now most of them have gotten something like an SEC, and I think that (change in view) will happen here."

Pozen mentioned the contradiction that exists between the research findings on Sarbox's benefits and foreign companies' new reticence to list here. What about the contradiction between his observations and history, at least as described by Bowsher?

Update: We've checked into Pozen's board memberships and have found absolutely no evidence that he has conflict of interest because of the companies' 401-k business. So I've deleted the previous conspiracy theorizing here on this question.