Sarbox and Immigration Reform for Jobs

Mr. Greifeld is CEO of Nasdaq OMX.

EXCERPT FROM THIS ARTICLE:  First, we need to consider revising the 2002 Sarbanes-Oxley accounting-reform law—specifically Section 404, which requires costly external audits in addition to the traditional audits of a company’s financial statements. Sarbox is the most visible sign of overregulation in this country, and the primary excuse for foreign companies and smaller domestic companies to forgo a U.S. public listing.

In President Obama’s address before Congress last month, he discussed several ideas Washington could implement to foster job growth. These reforms, such as re-evaluating the corporate tax code and passing free-trade agreements, will definitely create jobs. But we also need to fix the structural problems that are harming the development of small and medium-sized companies, which have historically done the most to create jobs.

According to the Small Business Association, small businesses accounted for 64% of the 15 million net new jobs created from 1993 through 2008. In 2010, only 51% of jobs in the U.S. were created by small businesses. In the 1990s, initial public offerings by smaller companies (those raising $50 million or less) averaged more than 300 per year in the U.S. In 2010, there were only 30. Clearly, we need to do more to promote capital formation by these engines of job creation.

At Nasdaq OMX, we’re doing our part with a $730,000 grant to the Edward Lowe Foundation to fund the Institute for Exceptional Growth Companies, a new research and education institute focusing on job growth and capital access for developing companies in the U.S. But there are additional actions the government can take to spur and sustain job growth.

First, we need to consider revising the 2002 Sarbanes-Oxley accounting-reform law—specifically Section 404, which requires costly external audits in addition to the traditional audits of a company’s financial statements. Sarbox is the most visible sign of overregulation in this country, and the primary excuse for foreign companies and smaller domestic companies to forgo a U.S. public listing.

In 2010, Congress took a first step by exempting companies with a total market capitalization of less than $75 million from the requirements of Sarbox 404. Expanding this exemption to include companies with a market cap of up to $700 million will significantly reduce the costs of going public for many firms. In addition, making the 404 audit a biennial event for those companies who receive a clean bill of health will reduce the costs of larger companies without depriving investors of the assurances provided by 404.

We also need to do all we can to encourage the development of a venture-capital market for companies that are too small to trade in the usual public markets but have the need to raise capital. The U.K., Canada and Sweden all have exchange markets that serve as “incubators” for smaller companies, many of which move on to listings on their countries’ main markets. In the U.S., the Securities and Exchange Commission recently approved Nasdaq OMX’s proposal to create the BX Venture Market, which will have strict qualitative listing standards but lower size requirements to attract smaller firms. Nasdaq OMX recognizes that giving these companies easier access to capital at this stage in their development is fundamental to their growth.

Finally, we should increase the numbers of H-1B visas for highly skilled workers and reform the employment-based green-card process. The National Federation for American Policy says that for every H-1B worker requested, U.S. technology companies hire five workers. In Silicon Valley more than half of new technology start-up firms were founded by foreign-born owners. In the most recent Intel Science Talent Search competition, 70% of the finalists were children of immigrants.

Highly skilled immigrants don’t just benefit Silicon Valley. Duke University reports that in Texas nearly one in five technology companies were founded by an immigrant. Entrepreneurs are critical to this country, but under the current system we are educating highly skilled individuals and sending them elsewhere. By attracting and keeping the brightest, hardest-working employees here in the U.S., we will make our companies and economy stronger, producing still more jobs.

President Obama said that we can’t wait for 2012 to make a change. The leaders I speak with in the business community couldn’t agree more. As the president said, we can “out-innovate every other country on Earth.” Reforming Sarbanes-Oxley, making venture capital more accessible, and opening our doors to more highly skilled workers is a good place to start.

Mr. Greifeld is CEO of Nasdaq OMX.