Companies are spending an increasing amount of time and energy beefing up their regulatory filings to meet disclosure requirements. The average 10K is getting longer—about 42,000 words in 2013, up from roughly 30,000 words in 2000. By comparison, the text of the Sarbanes-Oxley Act of 2002 has 32,000 words.
The finance department at GE, as well as Athenahealth Inc. and Abercrombie & Fitch Co., among others, spend several weeks every quarter updating filings to comply with securities rules, which they say is a costly undertaking.
Athenahealth, a provider of electronic health records, has three full-time employees to help with the increased disclosure requirements, said Karl Stubelis, chief accounting officer and controller of the Watertown, Mass., company. That’s up from just one two years ago.
Some companies wonder whether investors benefit from the additional information. Their question: How much is too much?
Monga, Vipal and Chasan, Emily. "The 109,894-Word Annual Report." The Wall Street Journal., Tuesday, June 2, 2015, B1, Accessed on June 2, 2015, http://www.wsj.com/articles/the-109-894-word-annual-report-1433203762
It took the great F. Scott Fitzgerald only 48,884 words to tell the story of how Jay Gatsby came to be shot in the back. Today I read that it takes a public company an average of 41,911 words to shoot itself in the foot with the burdensome annual preparation of often unnecessary financial reporting.
It seems as if regulators at the SEC are ignoring, to all our peril, the simple wisdom that in a complex world the optimal aim of regulation is to minimize administrative costs while maximizing proper incentives for human action.
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