Wednesday, December 28, 2005
SOX Section 404 Backlash
Sarbanes-Oxley (SOX) has been law since July 2002 and the collapses and financial carnage created by Enron, Tyco International, WorldCom, Adelphia Communications, HealthSouth, and Cendant, may have lost their prominence in people’s minds. Bloomberg reports executives are becoming more vocal that SOX has become an overzealous exercise to contain and detect corporate corruption. Section 404 is the current battlefield.
"I would like to see it opened and revised. Sarbanes-Oxley has become extraordinarily expensive," said David Chavern, vice president of capital markets at the U.S. Chamber of Commerce in Washington, D.C. told Bloomberg.
The number of U.S. financial restatements climbed 28 percent over 2003 to 2004, prompted by SOX, according to the Huron Consulting Group. Office Depot CEO Steve Odland, told Bloomberg, "You have more independent eyes scrutinizing the decision making and the financial statements of the companies." Odland is also the chairman of the Business Roundtable’s corporate governance task force.
Several changes have come about as a result of SOX. The New York Stock Exchange requires that boards have a majority of independent directors now. The year 2001 saw 61 percent of boards with independent directors, compared with 89 percent in 2005, according to the National Association of Corporate Directors. Bloomberg reports that only three, of the eight directors of the bankrupt commodities exchange Refco, were independent.
posted by Brian Moran @ 9:28 AM