March 21, 2006
CorVel has revenue just over $250 mil and a cap value near $200 million, so it appears we are left to being "too large" to have an exemption.
The cost of 404 is now tenfold what we used to spend on auditing. Even our quarterly review is now eight times what it used to cost. Our total direct expenditures are over $2 million a year and reduce our annual earnings by 15%. This is devastating to our shareholders.
More importantly, the Committee does not realize that such added expenses now consume 100% of our discretionary expenditures. Most companies only have a relatively small amount of funds that can be allocated each year to important new innovations. The large majority of corporate funds are already spoken for. As a result SOX eliminates our ability to invest in our company.
The effect of SOX is devastating to morale as well. The kind of people who want to work and to innovate, are not at all the kind of people who can tolerate constant, year-round auditing. The message of SOX to our employees is: "You are not trusted." This change in the entrepreneurial spirit of America is already visible in the poor US stock market and the booming international stock markets. SOX is the most destructive legislation ever passed for business. The costs are huge, but the change in the culture of business in the US will be devastating.
It is clear that no one in a position to change what has been done, has spent any time whatsoever reviewing the absurd kinds of activities in which we now have to spend our entire year. SOX constitutes government control, using auditors as the agents of the government, not unlike the controlled economies of East Germany and the Soviet Union. You will get the results achieved there. But do not believe you can do this without a reaction in the free markets. Business will leave the US and the capital for innovation will leave.
No one has the political courage to speak up and to correct what has been done. This is a very large step toward the decline and sunsetting of American capitalism.