Survey cites payouts, audit fees in higher costs for public firms.The cost to companies of being public has dropped from historic levels but remains high due to skyrocketing audit fees and increased payouts to attract qualified directors, a study has found. The law firm Foley fo·ley n. 1. A technical process by which sounds are created or altered for use in a film, video, or other electronically produced work. 2. A person who creates or alters sounds using this process. & Lardner analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. data from more than 850 proxy statements Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. and found that audit fees jumped 22 percent for small-cap companies, 6 percent for mid-cap and 4 percent for large-cap firms listed in Standard & Poor's indices. "Corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. reform continues to present a more significant financial burden for small public companies than it does for larger ones," said Tom Hartman, a Foley & Lardner partner who directed the study. Audit fees have more than doubled in the past two years because of stiffer compliance associated with Section 404 of the Sarbanes Oxley Act of 2002. The fees average $786,000 for small companies and $1.14 million for mid-sized firms, but hit smaller firms disproportionately dis·pro·por·tion·ate adj. Out of proportion, as in size, shape, or amount. dis  pro·por . Roughly
one-third of companies surveyed said the costs led to budget and staff
cuts.
In addition, annual directors fees have skyrocketed because of the greater liability associated with being a board member of a public company. Board pay at NYSE-listed companies averages $40,000, a 58 percent annual increase. Nasdaq-listed firms pay an average of $27,000 per director, a 71 percent increase. |
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