August/September 2006 Governance & Ethics News

• In the wake of the Sarbanes-Oxley Act of 2002, the impact is being felt on public and private companies alike, and it's not all bad news.


• Sarbanes-Oxley Audits Too Costly, Regulator Says


• Sec Chairman Defends Sarbanes-Oxley But Cox Acknowledges Internal-Control Rules Should Be Tweaked


• Kerry Bill Helps Small Businesses Comply With Sarbanes-Oxley


• Mexico's Salinas Settles Sarbanes-Oxley Suit

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In the wake of the Sarbanes-Oxley Act of 2002, the impact is being felt on public and private companies alike, and it's not all bad news.

No doubt about it, the passing of SOX has changed the landscape of corporate governance across the country, transformed the public accounting industry and reformed both disclosure and governance practices. Business journals, accounting websites and even Sarbox Blogs speak to the impact that SOX is having not only on public companies, but on private companies as well.

You can't pick up a business journal without finding the frequently discussed negative comments about the impact of SOX on public companies, especially significant cost burdens particularly to smaller companies that may be least able to cover the high cost of SOX compliance.

But a cross section of the literature also includes growing support for using SOX requirements to create Best Practices in response to corporate governance standards. For example, some companies say that they are finding that their investors, lenders, customers and vendors prefer to do business with companies that adhere to sound corporate governance practices. Companies that have improved their accounting controls and procedures report that they have better and more timely information to assist them in strategic decision making. Additionally, by maintaining more reliable financial information companies report better business decisions based on stronger and more reliable data.

Private companies considering an initial public offering (IPO) will need to comply with Sarbanes-Oxley well in advance of filing for the IPO. Companies that are acquisition or merger candidates are more valuable if their corporate governance practices and accounting controls are sound and reliable.

Based on the positive aspects of SOX and Best Practices reported by many public companies, privately held companies, although not required to comply must weigh the cost of compliance with SOX standards against the potential benefits of voluntary compliance.

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Sarbanes-Oxley Audits Too Costly, Regulator Says - International Herald Tribune (9/20/06)

WASHINGTON The chairman of the U.S. Securities and Exchange Commission, Christopher Cox, has said that business practice audits required by the Sarbanes-Oxley Act are too costly and represent the "one notable exception" to the positive impact of the law.

Companies' bills for first-year compliance were especially high because of start-up costs and excessive efforts by the firms and their outside accountants, Cox told a hearing of the House Financial Services Committee on Tuesday.

The law subjects companies to stricter accounting rules and stiffer penalties for financial crime.

Read the article.

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Sec Chairman Defends Sarbanes-Oxley
But Cox Acknowledges Internal-Control Rules Should Be Tweaked (9/19/06) - MarketWatch

Securities and Exchange Commission Chairman Christopher Cox defended the controversial Sarbanes-Oxley law before a Senate panel Tuesday, but agreed with critics who say part of it needs to be changed.

Written four years ago in the wake of big accounting scandals at companies like Enron and WorldCom, the Sarbanes-Oxley law was intended to clean up corporate culture and make executives accountable for their companies' books.

But the law has been accused of saddling companies with undue burdens, since its Section 404 requires potentially expensive audits and multiple hours dedicated to checking and rechecking corporate balance sheets.

Cox acknowledged those complaints Tuesday but said that the law is fixable.

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Kerry Bill Helps Small Businesses Comply With Sarbanes-Oxley (9/21/06) - U.S. Newswire

WASHINGTON, Sept. 21 /U.S. Newswire/ -- Sen. John Kerry (D- Mass.) introduced legislation today that would help small public companies with the costs of implementing Sarbanes-Oxley regulations.

The Small Business Sarbanes-Oxley Assistance Act of 2006, introduced by Kerry, would authorize the U.S. Small Business Administration to award federal grants to small businesses to help them cope with the cost of complying with Sarbanes-Oxley regulations. It also creates a task force, assembled by the SBA Chief Counsel for Advocacy, and comprising of representatives from the U.S. Securities and Exchange Commission (SEC) and others, to report semi-annually on how to reduce the red tape and financial burden, assisting small public companies complying with Sarbanes-Oxley.

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Mexico's Salinas Settles Sarbanes-Oxley Suit (9/15/06) - Forbes.com

Ricardo Salinas Pliego, who made his fortune in television, retail, and cellular services, and is one of Mexico's more colorful billionaires, reached a settlement with the U.S. Securities and Exchange Commission last week in the first lawsuit against a foreign company under the rules of the Sarbanes-Oxley Act.

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