Investment in compliance can yield returns that far
outweigh the costs, according to research by Virsa, which supplies
compliance tools for ERP systems.
Mark Feldman, senior vice-president at Virsa, said concerns about
compliance with Sarbanes-Oxley regulations had led many US
companies to restate their results, with damaging consequences for
their share prices.
"When a company issues a restatement, its share price drops 9% in
the first week. In the first three months its share price drops by
18% compared with what it was before," he said.
The impact of poor compliance on share price has attracted the
attention of investors, who are increasingly demanding proof of
good governance, said Feldman.
A survey of 135 analysts found that 65% were willing to pay a 10%
premium on share price for firms that could prove they had proper
governance systems in place.
Some 83% said governance influenced their investment decisions, 61%
said they would avoid companies that had a low governance rating,
and 95% said strong governance controls were crucial investment
criteria.
On the basis of this research, whatever organisations spent
complying with Sarbanes-Oxley, their likely returns were much
greater, said Feldman.