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The price of honesty--Sarbanes-Oxley Act of 2002.

Like many corporations, your publicly traded company has been a rather late and disgruntled adopter of the tough corporate compliance rules established by the Sarbanes-Oxley Act of 2002. You've struggled to meet the provisions of Section 302, already in effect, which covers detailed certification of quarterly financial statements. But Section 404, which holds executive management responsible for their company's internal control system, is all about you!

In order to receive your stamp of approval, AMR Research estimates that Fortune 1000 companies will spend $2.5 billion on Sarbanes-Oxley compliance this year. We turn to those immersed in the complexities of this effort for guidance. How are they planning to approach compliance? Are they planning to use outside help, or is this something to be done internally? If they outsource part of the processes they are certifying, does it make it easier or harder? Contact: jim.madden@exult.net

Don Tapscott

President, New Paradigm

Learning Corporation

Sarbanes-Oxley is just the tip of the transparency iceberg--passive, forced compliance for financial disclosure Smart firms actively embrace transparency as a powerful new force in business that reaches far beyond just financial information. People and institutions that interact with firms are gaining unprecedented access to all sorts of information about corporate behavior, operations and performance. Armed with new tools to find information about matters that affect their interests, stakeholders now scrutinize the firm like never before, informing others and organizing collective responses. The corporation is becoming naked.

Customers can evaluate the worth of products and services at levels not possible before. Employees share formerly secret information about corporate strategy, management and challenges. To collaborate effectively, companies and their business partners have no choice but to share intimate knowledge with one another. Powerful institutional investors today own or manage most wealth, and they are developing x-ray vision. Finally, in a world of instant communications, whistle-blowers, inquisitive media and Googling, citizens and communities routinely put firms under the microscope.

Corporations have no choice but to rethink their values and behaviors--for the better. If you're goIng to be naked, you'd better be buff! Embrace transparency, rather than fighting it.

Contact: don.tapscott@tapscott.com

Geney D. Gibson

Senior VP Global Finance Operations,

Universal Music Group

As our organization took to the Sarbanes-Oxley act as the law and an immediate "to do," there was never a pushback. I further believe the lessons learned by the Y2K implementations/ actions serve as a great guide on how not to get caught up in irrational spendIng and outsourcing. The key In the process is to make everyone feel not just accountable but "obligated" to live by these new policies and procedures. After careful review, this is one of the main reasons we opted not to use any of the compliance software packages on the market or an outside consulting firm to help with the implementation.

We felt we knew our business better and could be faster at our own due diligence. Let's face it: When you get to the poInt of attestation for the end of 2004 financials and the consultants have collected their fees, if you think any of them or their firms are going to be accountable, you are mistaken.

The moral of this effort is that we stand by two principles here: first, acknowledge it's a large amount of work for our internal business traits, with no additional support, and the resulting change will be permanent; and second, we fundamentally do not believe the assessment of our controls and any necessary remediation is a complex activity. Even our funding for this effort is not considered a budget item--rather, we "capture" the costs as a line-item expense. This is a knowledge that needs to be understood deep within the organization, where only practical hands-on experience allows you to understand and, ultimately, live by its local or unique complexities and attest to its effectiveness.

Contact: geney.gibson@umusic.com

Oscar Munoz

Executive VP and Chief Financial

Officer, CSX Corporation

Just recently arriving at CSX from AT&T, I inherited the Sarbanes-Oxley process that had been developed and approved by both our senior management and board of directors. I asked an outside consultant to review the process as created internally, and while they offered minor modifications, their overall assessment was that the plan is solid. However, I believe that with change comes opportunity. As financial processes and controls were reviewed and modifications made, I met with line managers to seek their Input and draw on other meaningful information to determine additional ways that we could have positive effects on the bottom line. I firmly believe that Sarbanes-Oxley, far from just a regulatory burden, offers CSX the opportunity to again look at process improvements and re-invigorate those that have, over time, not been used to their full potential.

My recommendations include:

* Involve your audit committee early to fully tap the potential of process improvements and technology enhancements, resulting In a more strategic approach;

* View Sarbanes-Oxley as more than a corporate governance and compliance law--embrace it as an opportunity to rethink financial processes and refocus them on improving the bottom line;

* Benchmark, informally and formally, to learn from those companies that have completed this process.

Contact: omunoz@csx.com

Welcome to my column "Manage your Assets," a series of business topics in which senior executives, analysts and consultants share their best advice on the subject. Readers can continue the dialogue on their own by contacting the contributors directly. I encourage reader response and participation. Please contact me directly at jim.madden@exult.net (photo may be required if chosen).

Jim Madden has been a corporate consultant for over 20 years and is currently the CEO of Exult, Inc. (www.exult.net). Exult, Inc. (Nasdaq: EXLT), the innovator and leading provider of HR-led business process outsourcing (BPO) for Global 500 corporations.
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Title Annotation:Manage your assets
Author:Madden, Jim
Publication:Financial Executive
Geographic Code:1USA
Date:Nov 1, 2003
Words:966
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