Printer Friendly

HOME COMPANIES SWEAR IT'S TRUE.

NEW YORK-Every home goods company that had a deadline met it last week, complying with new Securities and Exchange Commission regulations requiring sworn statements attesting to the cleanliness of their books.

They faxed, e-mailed and also sent their statements overnight. And several companies, such as Linens 'n Things, sent in statements well before the due date.

All of the home goods retailers and suppliers tracked by HFN that are required to file statements by Aug. 14 had done so. The SEC is in the process of clearing their statements.

In the wake of recent accounting scandals, the SEC issued the order on June 27. It requires the chief executive and chief financial officers of 947 public companies with sales above $1.2 billion to submit statements that "attest to the accuracy of the companies' most recent annual and quarterly financial report."

In addition to the sworn statements, several companies issued separate statements attesting to the integrity of their accounting practices. Ralph Hake, Maytag chairman and chief executive officer, for example, told Wall Street last week that the company recently revised its "corporate governance" procedures to meet SEC requirements, as well as similar requirements proposed under the Sarbanes-Oxley Act.

The latter refers to a bill drafted by Sen. Paul Sarbanes, D-Md., and Rep. Michael Oxley, R-Ohio, that will force all of the 14,000 companies watched by the SEC to file sworn statements about their books and not just the 947 companies who are currently filing.

"Maytag has a long and deep-seated tradition of integrity, and we certified our financial statements without hesitation or reservation," said Hake. "We have been in compliance with financial disclosure rules, and will continue to be."

The tone of other companies submitting statements was similar. Industry observers noted in reports last week that the SEC requirement was a much-needed tool for instilling investor confidence, especially when the statements are filed at or before their deadline. But some executives thought the requirement was ridiculous.

"It's silly," said a senior-level executive of a major furniture maker. "Companies that are in total compliance but forget to certify are put in a position of breaking a law."

Still, many companies rushed to submit the statements before the deadline, and in some cases, earlier. Mohawk Industries, a flooring manufacturer with $2 billion in sales, complied early, sending in a sworn statement via fax and overnight delivery on Aug. 9. John Swift, the supplier's chief financial officer, explained that the company was filing its sales and earnings report at the same time. Asked whether or not such an oath would reassure skittish investors, Swift was frank. He had "no idea," he said.

There seemed to be little resistance against complying with the new requirement, although there were some managers who felt it added another layer to the SEC's "full disclosure" policy. And there were some companies who filed the certificate even though they weren't required to do so.

"Furniture Brands has no problem with signing these certificates, and would easily have done so in the past if required to do so," said Lynn Chipperfield, chief administrative officer of Furniture Brands International.

Mike Harmon, chief financial officer of Pillowtex Corp., said the textiles supplier was not among the 947 companies required to file the statement, but did so anyway because "our lawyers interpreted the law that came out, and we felt obligated to sign the certificate."

Accounting methods and executive pay packages tied to stock performance have been a touchy subject in the wake of recent scandals at Enron, WorldCom and Rite Aid. Meanwhile, those watching the retail industry are waiting for the other shoe to drop with Kmart as Chuck Conaway, former CEO, and Mark Schwartz, former president, are the focus of a federal investigation.

Last week, the U.S. Attorney's Office impaneled a federal grand jury in Detroit. More than 20 subpoenas were issued for witnesses as the feds investigate the bankrupt retailer, whose current management has been cooperating with authorities.

At other companies, managers have employed preemptive strategies to bolster shareholder confidence. About the same time the SEC issued its order requiring sworn statements, management at J.C. Penney fired off a letter to employees attesting to the accuracy of the retailer's accounting methods.

The letter by Allen Questrom, chairman and CEO, was prompted by recent accounting scandals in addition to a Florida attorney general's investigation of whether Penney's Eckerd drug chain was overcharging for prescriptions.

"Let me start by stating the obvious," Questrom wrote. "The J.C. Penney Co., our company, is an honorable one. We're a traditional company; we use accounting to report profits, not manufacture profits."

For example, Penney's board of directors "has been an independent board under any reasonable definition," he said. "I have complete confidence in the financial reporting of your company."

Warren Buffett, the billionaire investor who heads Berkshire Hathaway, which owns a number of home furnishing manufacturers and retailers, has been outspoken in his support of accounting changes that go beyond those proposed by President George W. Bush and Congress.

Buffett and others feel that stronger action is needed to lure investors back to Wall Street. According to the Economist, almost three out of four Americans believe many companies have been cooking the books.

Buffett and others say the next step in shoring up accounting procedures would be to force businesses to subtract from earnings the fixed-stock options that executives receive to buy company stock at steep discounts. The idea is to reduce corporate executives' temptation to inflate the value of their companies' stock.

Some U.S. companies have already started to initiate this type of accounting. But it's not catching on rapidly. In the meantime, Wall Street is left with the SEC certification regulation.

"I think it will instill confidence on Wall Street," said Pillowtex's Harmon. "It will get people's attention."
COPYRIGHT 2002 MacFadden Communications Group LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2002 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Zaczkiewicz, Arthur; Leizens, Leticia; report, Jennifer White contributed to this
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Article Type:Brief Article
Geographic Code:1USA
Date:Aug 19, 2002
Words:969
Previous Article:SAY IT AIN'T SO, JOE: WE'RE AMESLESS.
Next Article:LETTERS.
Topics:


Related Articles
Featured News from Business Week Online's Daily Briefing.
Watchdog is called in on swear claim.
Lassie lives on.
Swearing thug jailed over death; SENTENCE.

Terms of use | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters