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February 27, 2006
One Bank’s Crocodile Tears over Sarbanes-Oxley
Footnoted.org is a blog all investors in publicly-traded equities should pay attention to; Michelle Leder does a terrific job at proving the devil is indeed in the details. The details, in this case, are the footnotes and generally ignored SEC filings of public companies.
I was particularly amused by her highlighting of the case of Sound Financial, which recently announced it was being acquired by Hudson City Bancorp. In one press account, the cost of Sarbanes-Oxley compliance was cited as the "biggest enemy" of small banks like Sound Financial. In Sound Financial’s case, the amount cited was $500,000.
Seemingly while the bank was being shopped, executives of Sound Financial found the time and money to be able to overhaul employment agreements, benefit plans, and retirement plans and agreements for top officers and directors. The 8-K filing revealing these changes, dated December 8, 2005, contained the term "change of control" 95 times, Leder notes.
Sound Financial announced its sale just two months later. We’ll never know the answer to the question, but I wonder how much shareholder wealth got deducted from Hudson City’s purchase price because of the economics behind that December 8-K filing?
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Comments
John, I find the above article interesting. Sarbanes-Oxley is just another government do-gooder bill that has cost shareholders and consumers a ton of money. It has done little change anything except line the pockets of CPA's and Regulators. I noticed where the filings and related regulation cost Google two million dollars. It is like pouring sand in a rat hole!
At least, the people that got new contracts, etc which the article mentioned, were producing something instead of sucking the blood out of shareholder value for nothing.
Just my 2 cents worth.
Posted by: John at March 4, 2006 7:42 AM
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