I gifted Jeff Nolan a nice bottle of California Red when I saw him last time - and he politely reminded me that was not what we had bet on last year that SOX would be repealed this year. I better dig deep in the wallet.
But when I see letters like this to the SEC from the CEO of Macrovision, I am glad I have been hard on SOX. Let me make my plea again - write to your Congressman. It will not save me from spending on that nice bottle of wine, but could be saving our economy lots.
Dennis Howlett writes about PwC's "Total Tax Contribution" service for corporate clients.
So, last few years they have been encouraging governments to tighten compliance rules on corporations that "cannot be trusted". Now they go to corporations and show them their "ecosystem" pay too much in taxes to those governments.
The profession sure has changed since I got my certification. A lot more activist. And much better revenue stream managers.
James Governor reports from CA conference which applauds that SOX has helped software sales. Along with accountants and lawyers, tech vendors - particularly software vendors - have benefited from the SOX bonanza.
Call me naive but technology which does not delight customers first - then investors, then way down political interests - is why our IT budgets are under so much scrutiny. Empty calories.
Besides, cozy up to the politicians and they invariably extract a price. Soon we will not be calling them our "best salesmen" but our "biggest leeches".
True North for the industry is on Main Street, not Wall Street or DC.
This continues a series of my posts on Sarbanes Oxley. This one is about a viewpoint from academia. Courtesy of Thomas Otter, I saw this paper “The
Sarbanes-Oxley Debacle: What We've Learned; How to Fix It” by Prof. Henry N. Butler of Chapman U. and Prof. Larry Ribstein of University of Illinois
College of Law
Some quotes from the abstract:
"Although investors do not like to be defrauded and do want
some regulation, they will find such regulation valuable only if the benefit
from reduced fraud is greater than the cost of compliance by the firms they
invest in. SOX attempts to create a world with zero fraud.
SOX will surely turn into a festival for trial lawyers.
Litigation on this scale should not be confused with shareholder protection.
SOX has created a ticking litigation time bomb.
It is highly unlikely Congress could outthink (our dynamic
financial) system, particularly during the regulatory panic of 2002."
The authors would like to see repeal but practically would
like to see it significantly scaled back. Now we just need to convince the
trial lawyers, the accountants and the tech vendors who think SOX ROX.
Erik Keller describes Sarbanes Oxley in French Revolution terms. In a comment he says "the rage that the
average person has had for the cascade of examples trotted out over the years."
I have heard others defend SOX in similar "justice" terms. Big is bad. We are making Immelt and McNealy and other CEOs look as guilty as Lay and Ebbers.
In Dickens' book, England became a safety valve for various people wanting to escape the Bastille and the Guillotine. The London Stock Exchange has similarly benefited from our version of the Bastille. Of course, we could export the revolution. With Nasdaq trying to acquire the LSE and Europe's own often aggressive compliance initiatives, the possibility is not remote.
There's no such thing as a free lunch. Even if we promise the masses they can eat cake.
Tom Peters compliments Freddy Delgado, an elementary school principal who was a juror on the recent Enron case - ""I can't say that I don't know what my teachers were doing in the classroom. I am still responsible if a child gets lost."
In the current SOX spirit though, I suggest we make him put GPS trackers on every student and have him certify each night that they were accounted for. And then audit him frequently. And while we are at it, have the school buy a bunch of software to keep track of the records for the auditors to scan.
Lay and Skilling of Enron fame have been found guilty. The drumbeat will grow louder- about this being exactly why we need Sarbanes Oxley. Slight problem - Sarbanes Oxley has already been in place for 4 years and has already cost corporate America hundreds of billions of dollars.
Have our watchdogs – external auditors and the SEC – retooled
themselves to better deal with Chewcos (one of the more complex Enron transactions)? If SOX had been in place 4
years ago would Enron management have not attempted such transactions?
Are we as individual and institutional investors any savvier about
Chewcos - or similar risks in our portfolios?
The answers are No, No and No. Instead of helping us find the Lays and the Skillings, our watchdogs want our Immelts and McNealys and other good corporate citizens to continue to bear the cross for a few bad apples.
SAP announced a major Governance, Risk and Compliance initiative at Sapphire. It seeks to leverage all the corporate spend around Sarbanes-Oxley, its acquisition of Virsa etc. But if customers are not careful they may get hit with hyped up costs and poor payback. Read more at TechSpend.
I was pleased to receive from a reader of the blog, Gopi Palamaner, a copy of
Business Review article by two Deloitte authors. The article was full
of promise given my cynicism about SOX:
"A few smart companies have stopped complaining about Sarbanes-Oxley,
the investor-protection law, and turned it to their advantage—bringing
operations under better control while driving down compliance costs."
So here I was looking for tangible savings, payback from SOX. What do I see
-- examples of improved documentation, corporate ethics training, improved
software change management, consolidation of multiple ways of processing
All important improvements, but my reaction was:
a) for stuff being done by accountants, the benefits seemed awfully soft -
no numbers or payback cited after 4 years with thousands of companies in the sample pool
b) I would rather initiate a rigorous Six Sigma or CMM process to drive such
improvements. I want operational efficiency, not just internal controls to drive
c) not sure I would hire a Deloitte or another accounting type firm to give me
advice on improvements in operational areas. The problem with SOX is they have
been influencing areas where they have little process expertise.
I almost gagged when they cite one benefit from a client as "“We hope
to score major points with our auditor for doing this”. If this was an Excel spreadsheet, you would get a circular logic error.
Talking about SOX, Jeff
Nolan and I have a bet on whether SOX will be amended (scaled back) this
year. Jeff will probably win on a technicality because as he says there is no
chance of that happening in an election year. But he agrees with me it needs to
be changed "While I no doubt will enjoy the bottle of wine that Vinnie
will owe me come Jan 1 2007, I would much prefer to lose this bet if it meant
we could get this bad law fixed."
Then he points to what former Fed Chairman Greenspan
has to say about SOX.
Hey, sounds like Jeff has winner's remorse - but he will likely get an
unexpected benefit from SOX. Something tangible the Deloitte authors can cite!
Courtesy of Dennis Howlett, I saw this assessment of a variety of Sarbanes Oxley compliance tools. Hats off to Rohit for a) publishing this on an "open source" basis and b) having the guts to say what needs to be said about these tools, their utility, their costs.
As my readers know, I am not a big fan of SOX. Too many tech vendors and consultants have signed on to this entitlement train, when they should be helping clients becoming more efficient and innovative.