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From Public to Private: A Small Public Company's Reaction to Sarbanes-Oxley
Belverd E. Needles Jr.,
DePaul University
ABSTRACT. Tha passage of the Sarbanes-Oxley Act of 2002 (SOX), which calls for more independent directors with financial expertise on the audit committees of public companies, was a motivating factor behind many changes in corporate governance. This paper narrates the experience of a new member of the board of directors and audit committee of a small public corporation. This paper delineates the ethical and corporate governance issues faced by the board and the audit committee. It tells how the issues were resolved in an environment of rapid regulatory change. In particular, this paper describes how the effects of the SOX Act led the company to privatize and the steps taken to make the transition from public to private. Although the company is no longer subject to SOX, dealing with the act improved the company's governance structure, strengthened its ethical oversight, and led the company to move in the direction of employee ownership.
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