It's time to revise Sarbanes-Oxley.THE EVIDENCE is now overwhelming that Sarbanes-Oxley has gone too far. Enacted in a moment of urgency in 2002, following the meltdowns at Enron and WorldCom, the legislation was perhaps necessary at the time. But even Rep. Michael Oxley, Republican of Ohio, acknowledges today that it is an imperfect law. The first moment of truth will come when we learn what percentage of companies have been able to win certification for Section 404 compliance, the last section of the law to be phased in. Section 404 requires that companies establish internal controls which an outside auditor certifies as lacking any material weakness. The Public Company Accounting Oversight Board The Public Company Accounting Oversight Board (or PCAOB) (sometimes called "Peekaboo") is a private-sector, non-profit corporation created by the Sarbanes-Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. has defined "material weakness" to mean a control deficiency that results in the possibility that a misstatement mis·state tr.v. mis·stat·ed, mis·stat·ing, mis·states To state wrongly or falsely. mis·state  ment n. of financial results could occur at some point in the future. By some estimates, 25 to 50 percent of companies won't have met the year-end deadlines. There aren't enough auditors to get the job done. And besides, it's a completely bureaucratic bu·reau·crat n. 1. An official of a bureaucracy. 2. An official who is rigidly devoted to the details of administrative procedure. bu exercise. How can anyone prove that something bad can't happen (programming) can't happen - The traditional program comment for code executed under a condition that should never be true, for example a file size computed as negative. Often, such a condition being true indicates data corruption or a faulty algorithm; it is almost always handled in the future? Securities and Exchange Commission Chairman Bill Donaldson, who already has extended the deadline for smaller companies, has to send a clear and early signal: The feds are not going to rake CEOs over the coals on Section 404. The next step is to push for revision to the law as a whole. The law is having the unintended impact of hurting shareholders. CEOs at our Leadership Summit (see page 50) argued that Sarbox is discouraging them from taking risks and therefore making money. Their share prices are being punished, particularly if they get a "qualified" opinion about 404 compliance. Many companies have stalled spending projects because of regulatory worries. The law has discouraged some mergers and acquisitions because no CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. wants to buy a company that may have accounting issues. And bottom lines are being hurt as CEOs spend millions of dollars on lawyers, accountants and auditors. It's time It's Time was a successful political campaign run by the Australian Labor Party (ALP) under Gough Whitlam at the 1972 election in Australia. Campaigning on the perceived need for change after 23 years of conservative (Liberal Party of Australia) government, Labor put forward a to start fighting back against creeping criminalization crim·i·nal·ize tr.v. crim·i·nal·ized, crim·i·nal·iz·ing, crim·i·nal·iz·es 1. To impose a criminal penalty on or for; outlaw. 2. To treat as a criminal. . Send us your suggestions about fixing Sarbox via email (editorial@chiefexecutive.net) and we will assemble and publish a CEO wish list for change. It's a place to start. |
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