Changes since Sarbanes-Oxley: Financial Executive/Deloitte & Touche survey.

You might think, what were they thinking--referring to those involved in writing provisions for The Sarbanes-Oxley Act, especially in light of its compliance demands on corporate America's finance executives. So, how much has really changed? To find answers to a few targeted questions, during the last two weeks of August, Financial Executive and Deloitte & Touche conducted an electronic survey to get some answers--via FEI's Web site and as an insert in FEI's Express email communication. Just under 100 executives (CFOs, controllers, SVPs, directors, EVPs) responded to the four multiple-choice questions and one open-ended question.

A general theme of the responses was one of resignation to comply with the new rules--although they represent "overkill"--and that rules cannot change those who would be dishonest. As to whether Sarbanes-Oxley has helped to restore public trust in U.S. business, as many said "yes," "probably" and that it was "too early to tell" as those who said "no."

"The greed of executives was the real cause of the Enron/WorldCom-type melt-downs," said one, adding that "this type of legislation penalizes organizations who operate with a social conscience and individuals who have taken their stewardship function very seriously. It attempts to legislate morality and ethics."

Respondees came from companies with revenues ranging from $25 million to over $5 billion; with 51 companies having revenues of $500 million and above; and 22 at $1.4 billion and above. Forty-three companies employ 2,500 and more; 15 employ 5,000-plus; and 19 employ l0,000-plus.

In 97 percent of the companies, the new regulations have been adopted--in 55 percent to a significant degree, and in 42 percent to a limited degree. Implementing Sarbanes-Oxley has improved the quality of internal controls in 74 percent of the companies--with 8 percent citing "significant" improvement, 66 percent reporting "slight improvement" and 26 percent saying there is "no improvement at all."

On the question of limiting the amount of work of outside accountants over the past year by the finance person or audit committee, 41 percent said "yes, to a small degree," 20 percent said "significantly," 28 percent said "no," and 11 percent don't ask their accountants to perform work other than audit.

When asked, "Has your directors' involvement with the company governance issues changed?" all but 8 percent said, "yes," but the degree varies: 61 percent, not significantly; 28 percent, significantly; and 3 percent cited a "dramatic increase."

The comment section to the open-ended question--Do you think that Sarbanes-Oxley has helped to restore the public trust in U.S. business?--received responses that ranged from frustration and anger, to optimism and hope. Several were brief and to the point, with a "yes" or "no," while others gave lengthy, thoughtful replies. Here are some of the statements, starting with the "nays:"

* No, it has reinforced the public's opinion of America's over-bloated, over-complicated approach to solving all problems. We act fast and look last.

* No, our public accountants are the only ones who have benefited. They are generating 30-40 percent more in revenue as a result of this legislation. Enron, WorldCom, HealthSouth, Tyco failed because of the ethical behavior and character of their leadership--not because their controls were "well documented and tested."

* It was an action with the intent to improve trust. ...any action increases the perception that something is being done in the short term. However, ...Sarbanes-Oxley is a peanut-butter approach trying to add more regulation to what is at its core an enforcement issue.

* Sarbanes-Oxley will eventually become known as the "lawyers' and accountants' full employment act" that brings few benefits, but much added cost to investors.

* No, bad people make bad accounting. Rules don't fix the problem of bad people--they will always find a way around the controls.

* No, you cannot legislate ethics, and you cannot change behavior overnight. Finally, on the more positive side:

* In part [it] restored some of the public trust because the public does not fully understand what it does and does not do. Because the press mentions it so much, the public believes that it is a panacea to the corporate wrongdoings of the past few years.

* Not yet, but a great beginning. Five years from now, public companies (as well as private companies) will be better off. Especially, corporate boards will be doing more corporate governance while management runs the company.

* It will take time, with no additional occurrences, for that to happen....a step in the right direction for shareholders to know that management is indeed responsible for the financial statements. Sending more senior officers to jail for the various frauds that have occurred will also help.

* Somewhat, but only business can restore public trust over time.

And as one response kind of summed up the thoughts of many: "I think it has helped move us down the road, but we have a long way to go."