Thoughts on law departments if there are many fewer publicly traded companies since Sarbanes

Since Sarbanes-Oxley was enacted in 2002, “costs [of being publicly traded] have proven to be much higher, while the number of companies going public has dropped sharply.” The Wilson Quarterly, Spring 2010 at 47, mentions this, which made me think of legal departments (surprise, surprise).

If the number of companies going public has dropped sharply over the past eight years, then to that degree the workload of both in-house and outside corporate lawyers has changed. Less reporting under the Securities Acts, less complexity with incentive stock options, fewer decisions about 8Ks and releases, different kinds of acquisitions than with equities.

Second, if the number of new publicly traded companies is significantly lower, diminished further by some that have disappeared for other reasons and a few that have gone private, benchmark data from before Sarbanes might be less comparable to now. My sense is that the total legal spending of companies is lower when they are privately held, if only because the costs of shareholder derivatives suits shrink.

Third, the article makes the argument that if successful companies decline to raise capital by issuing stock, which incurs the expenses of SOX compliance, they are more likely to sell out to bigger firms. That means fewer law departments and smaller in-house staff, given the attrition rates that accompany mergers (See my post of Jan. 16, 2009: layoffs after mergers with 9 references, layoffs.).