The Sarbanes Oxley Act is a Paper Tiger PDF Print E-mail
Written by Prof. Paul Douglas Katchings   
Sunday, 14 June 2009
The Sarbanes Oxley Act is a Paper Tiger
Paul 'Tan' Katchings

The Sarbanes-Oxley Act (enacted July 30, 2002), also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called Sarbanes-Oxley, Sarbox or SOX, is a regulatory roadblock to the intellectually challenged venture capitalists, investment bankers, and lawyers who are too lazy to think!  “Getting SOXed” has become a common expression describing the death of IPOs.  I too was one of these lazy thinkers until I took some quality time to think this act through.

I agree that this act was not needed.  Something is fundamentally wrong when the government is growing faster than the private sector.  But I see nothing wrong with an act that tells public companies to do something that they should be already doing – 100% transparency for the protection of investors!

The problem with public companies are the managers, venture capitalists, investment bankers and a few securities lawyers who have drifted away from taking risk to providing themselves with guaranteed jobs at the expense of customers.  Do not blame SOX.  Blame these culprits who are plagued by fear and lack of guts!

What is needed are public companies that are owned by customers.  SOX can help move us in this direction.  It takes correct data and guts to step forward into publicly traded corporations that are owned by their customers automatically.

In case we have forgotten what capitalism is all about, it is the customers who provide the revenue.  Most of the revenue does not come from the 5% equity ownership for managers and employees of public companies or the 66% equity ownership for institutions, as is currently the case.

What prompted SOX?  People are fond of stating the “major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom.”  Actually SOX came from the cries of many who could not get in on the inside of the IPO process where venture capitalists, managers, employees and institutions reaped most of the value before the general public.

Here’s a challenge to the readers of this article:  1) Read SOX, 2) Find out exactly what the public offering process is, and   3) Tell me if SOX stops a company from being publicly traded!

Today there is not enough competition in the public company ranks because of lazy venture capitalists and investment bankers who refuse to think for the customers.

Public companies are able to create more value than non-public companies by the x=(a*b)/c formula where X is the stock price, A is revenue, B is earnings as a percentage of A, and C is rate of return.  Take for example a public company with 1 share, $1 of revenue and 25% earnings.  Let’s say the prevailing rate of return is 3%.  Then $1 times .25 divided by .03 equals $8.33.   Clearly $1 in revenue produced $8.33 in value.  The public corporation can create 2, 5, 11, 20 times or more value from $1 of revenue by using this simple formula x=(a*b)/c.

Achieving 25% earnings is not that hard to do with active thinking.  In fact 25% is on the low end when a new concept called Product Equity Value©. catches hold.  With the protection of the Sarbanes Oxley Act, customers will own new public corporations using Product Equity Value©.

A new “venture capital social network” at www.usab2bvp.com is assembling 14 million members to IPO one new company every day using the Sarbanes Oxley Act.  These 14 million customer-owners will enjoy real financial value using the simple value creation formula x=(a*b)/c.  

Here are some examples of what Product Equity Value©. with the help of the Sarbanes Oxley Act will do for the customer-owners of these new public companies.  Millions of customer-owners will be able to:

•    Buy a $1,100 green laptop computer and get $5,700 in instant equity
•    Buy a $100 green cell phone and get $1,038 in instant equity
•    Buy a $1,200 year supply of healthy food and get $5,500 in instant equity
•    Buy a Flat Panel HDTV for $400 and get $2,076 in instant equity
•    Buy a global medical insurance for  $3,300 and get $17,064 in instant equity
•    Buy a $65 ‘solar-lantern’ and get $337 in instant equity
•    Buy a $100 new 16 films annual contract and get $1,147.53 in instant equity

The paper tiger called the Sarbanes Oxley Act can also be seen as a valuable blessing in disguise.  Beneath the surface are new opportunities for active thinkers.


Paul Katchings
Product Equity Value©
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Last Updated ( Wednesday, 24 June 2009 )
 
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