A subcommittee hearing convened recently by U.S. Rep. Bill Huizenga (R-MI) explored the link between federal corporate governance policies and the declining number of public companies, and solutions to promote better capital formation and economic growth.
The hearing focused on how the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act, passed in 2002 to crack down on fraudulent accounting practices, have impacted public companies over the last 15 years.
“I find it extremely concerning that the number of publicly traded companies is approximately half of what it was 20 years ago,” said Huizenga, the chairman of the House Financial Services Subcommittee on Capital Markets, Securities, and Investment. “While there are many factors as to why the number of public companies has declined, the main challenges I continue to hear about are how difficult it is to go public and how difficult it is to remain public.”
Lawmakers say Congress must work to build on the success of the Jumpstart Our Business Startups (JOBS) Act, which was signed into law in 2012 and required the Security and Exchange Commission to write rules and commission studies on capital formation, disclosure and registration requirements.
Huizenga said the nation’s securities regulatory structure must be modernized to facilitate economic growth. “It’s time to get the federal government working to ensure that American businesses are able to raise the capital they need to expand, support innovation, and reward hard working Americans,” he said.
Thomas Farley, the president of NYSE Group, said public companies are engaged “now more than ever before” in corporate compliance evaluation and demonstrating compliance with new and enhanced regulatory requirements.
Tom Quaadman, the executive vice president at the U.S. Chamber of Commerce Center for Capital Market Competitiveness, agreed with Huizenga that the JOBS Act should be built upon.
“No one single event or regulation lies at the heart of the public company crisis,” Quaadman said. “Like straw upon a camel’s back, the burdens and reporting requirements associated with being a public company have steadily accumulated over the years, to the point where many businesses today are saying ‘no thanks’ to a model that was once the ultimate dream of American entrepreneurs. The JOBS Act was a good first step towards arresting this worrisome trend, but there is more that can and should be done.”