The Sarbanes-Oxley Act of 2002 (Sarbox) was intended to prevent fraud and improve corporate governance, but it has become the most costly and counterproductive regulation imposed on public companies. Complying with Sarbox costs $35 billion annually, far more than estimated. It has empowered auditors but not improved fraud detection. While some reforms are beneficial, the costs outweigh benefits and Sarbox hinders innovation. Making some provisions optional could help address its negative impacts, especially on small companies and startups.
The IPO Plot Thickens: The SEC Gets Though on "Bad Actors"LexisNexis
Under a new Rule 506(d), a company considering an IPO cannot rely on exemptions if certain “covered persons” had a “disqualifying event” after the effective date of the amendments. If such an event occurred prior to
September 23, 2013, it would not lead to disqualification but would have to be disclosed with “reasonable prominence”2 to investors.
Covered persons include directors and certain officers, general partners and managing members of the issuer, as well as individuals compensated for soliciting investors and general partners, directors, officers and managing members of any compensated solicitor involved—collectively, a significant cast of actors.
Senator Joe Biden argues that the costs of complying with the Sarbanes-Oxley Act are far outweighed by the costs of corporate fraud and lack of transparency. He provides evidence that Sarbanes-Oxley has restored investor confidence by improving financial reporting accuracy and accountability. While some compliance costs exist, most companies that avoid regulation through private equity deals have serious financial issues, and all public companies should ensure accurate financial reporting. Maintaining high standards of transparency and accountability is crucial for the integrity of US capital markets.
This document summarizes key changes to securities laws and capital raising regulations under the JOBS Act of 2012. It discusses three new exemptions created by the JOBS Act that allow companies to conduct public securities offerings without SEC registration: 1) Title II allows general solicitation for offerings to accredited investors; 2) Title III permits crowdfunding from unaccredited investors; and 3) Title IV expands access to smaller public offerings. While the JOBS Act makes capital more accessible, it also increases responsibilities for business lawyers as regulatory gatekeepers.
This document discusses various topics related to corporate law including:
1) How corporations are regulated in Australia by the Australian Securities and Investments Commission (ASIC) and the Australian Securities Exchange (ASX).
2) The different models of corporate theory including managerialist, agency, team production, communitarian, and entity models.
3) Key aspects of partnerships including the definition under the Partnership Act, characteristics of partnerships, and liability in contracts, torts, and criminal law.
4) The process of incorporating a company under the Corporations Act including choosing a registration type as either a public or proprietary company.
JOBS Act Rulemaking Comments on SEC File Number S7-06-13 Dated June 11, 2014Jason Coombs
This document is a letter from the CEO of Public Startup Company, Inc. addressed to the Chair and Secretary of the Securities and Exchange Commission regarding recent JOBS Act legislation and proposed changes to regulations around accredited investors and funding startups. The CEO criticizes so-called "Angel" investors for ignoring securities regulations and urges them to educate themselves on Titles III and IV of the JOBS Act regarding new funding portal opportunities and Regulation A+ to qualify securities offerings. The CEO argues the SEC should have broad authority to regulate startup investing and determine who can qualify as investors.
- Goodyear voluntarily disclosed to the SEC that two of its subsidiaries paid $3.2 million in bribes between 2007-2011 to secure contracts worth $14 million. The SEC imposed a $16 million penalty representing the profits from the contracts.
- Whether voluntary disclosure is beneficial depends on the seriousness of the misconduct and quality of disclosure/cooperation. The article analyzes several cases where voluntary disclosure resulted in lesser penalties and cases without disclosure that faced larger fines.
- Voluntary disclosure combined with full cooperation and remediation tends to be rewarded most, while partial disclosure or noncooperation can lead to larger penalties. The best outcome comes from preventing misconduct through strong controls rather than disclosure after the fact
What are the digital and transparency implications of the FSA regulating the future agenda. I look at several in this months food issue of the CIEH environmental health news.
MACPA Professional Issues Update - Spring 2009 edition. Preso covers major trends affecting the CPA profession including the economic crisis, globalization, regulation/standards, technology, workforce, and Maryland legislative & regulatory developments
The IPO Plot Thickens: The SEC Gets Though on "Bad Actors"LexisNexis
Under a new Rule 506(d), a company considering an IPO cannot rely on exemptions if certain “covered persons” had a “disqualifying event” after the effective date of the amendments. If such an event occurred prior to
September 23, 2013, it would not lead to disqualification but would have to be disclosed with “reasonable prominence”2 to investors.
Covered persons include directors and certain officers, general partners and managing members of the issuer, as well as individuals compensated for soliciting investors and general partners, directors, officers and managing members of any compensated solicitor involved—collectively, a significant cast of actors.
Senator Joe Biden argues that the costs of complying with the Sarbanes-Oxley Act are far outweighed by the costs of corporate fraud and lack of transparency. He provides evidence that Sarbanes-Oxley has restored investor confidence by improving financial reporting accuracy and accountability. While some compliance costs exist, most companies that avoid regulation through private equity deals have serious financial issues, and all public companies should ensure accurate financial reporting. Maintaining high standards of transparency and accountability is crucial for the integrity of US capital markets.
This document summarizes key changes to securities laws and capital raising regulations under the JOBS Act of 2012. It discusses three new exemptions created by the JOBS Act that allow companies to conduct public securities offerings without SEC registration: 1) Title II allows general solicitation for offerings to accredited investors; 2) Title III permits crowdfunding from unaccredited investors; and 3) Title IV expands access to smaller public offerings. While the JOBS Act makes capital more accessible, it also increases responsibilities for business lawyers as regulatory gatekeepers.
This document discusses various topics related to corporate law including:
1) How corporations are regulated in Australia by the Australian Securities and Investments Commission (ASIC) and the Australian Securities Exchange (ASX).
2) The different models of corporate theory including managerialist, agency, team production, communitarian, and entity models.
3) Key aspects of partnerships including the definition under the Partnership Act, characteristics of partnerships, and liability in contracts, torts, and criminal law.
4) The process of incorporating a company under the Corporations Act including choosing a registration type as either a public or proprietary company.
JOBS Act Rulemaking Comments on SEC File Number S7-06-13 Dated June 11, 2014Jason Coombs
This document is a letter from the CEO of Public Startup Company, Inc. addressed to the Chair and Secretary of the Securities and Exchange Commission regarding recent JOBS Act legislation and proposed changes to regulations around accredited investors and funding startups. The CEO criticizes so-called "Angel" investors for ignoring securities regulations and urges them to educate themselves on Titles III and IV of the JOBS Act regarding new funding portal opportunities and Regulation A+ to qualify securities offerings. The CEO argues the SEC should have broad authority to regulate startup investing and determine who can qualify as investors.
- Goodyear voluntarily disclosed to the SEC that two of its subsidiaries paid $3.2 million in bribes between 2007-2011 to secure contracts worth $14 million. The SEC imposed a $16 million penalty representing the profits from the contracts.
- Whether voluntary disclosure is beneficial depends on the seriousness of the misconduct and quality of disclosure/cooperation. The article analyzes several cases where voluntary disclosure resulted in lesser penalties and cases without disclosure that faced larger fines.
- Voluntary disclosure combined with full cooperation and remediation tends to be rewarded most, while partial disclosure or noncooperation can lead to larger penalties. The best outcome comes from preventing misconduct through strong controls rather than disclosure after the fact
What are the digital and transparency implications of the FSA regulating the future agenda. I look at several in this months food issue of the CIEH environmental health news.
MACPA Professional Issues Update - Spring 2009 edition. Preso covers major trends affecting the CPA profession including the economic crisis, globalization, regulation/standards, technology, workforce, and Maryland legislative & regulatory developments
The Sarbanes-Oxley Act (SOX) aims to improve accuracy and reliability of corporate disclosures. For telecom companies, SOX compliance can help address revenue leakages through initiatives to analyze sources of loss and strengthen internal controls. Telecom companies can leverage SOX to optimize processes, accelerate revenue assurance programs, and enhance transparency in financial reporting.
President favours crowdfunding, but is it good enoughSilicon Halton
The President supports crowdfunding but questions if current proposals go far enough. Current securities laws prohibit general solicitation and limit participation to accredited investors, preventing startups from crowdfunding. Proposed legislation aims to allow crowdfunding but maintains complex rules, which may not be practical for small businesses to use. Simpler reforms, like allowing general solicitation and small investments from non-accredited investors under existing Rule 506, could enable effective crowdfunding without new complicated regulations.
This document summarizes discussions from three recent antitrust conferences:
1) The International Cartel Workshop focused on developments in international cartel investigations and leniency programs. Enforcers are increasingly cooperating across borders and emerging economies are strengthening penalties and leniency programs.
2) The Global Forum on Competition discussed the relationship between competition laws and corruption. Effective competition frameworks can increase competition and reduce corruption when they foster compliance and voluntary self-disclosure.
3) The ABA Antitrust Conference brought together practitioners to discuss recent developments in antitrust laws globally. Changes are happening rapidly in many jurisdictions, complicating compliance for multinational companies.
The Sarbanes-Oxley Act of 2002 was enacted in response to major corporate accounting scandals to increase corporate accountability and protect investors. It established new regulatory standards for public company boards, management, and accounting firms regarding issues like auditor independence, corporate governance, and financial disclosure. The Act created the Public Company Accounting Oversight Board to oversee auditing of public companies and established new criminal penalties for fraudulent behavior and retaliation against whistleblowers. Supporters believe it has helped restore confidence in financial markets, while critics argue it has increased regulatory burdens on companies.
Frost Bank is preparing for potential investigations into large banks by the Justice Department regarding the 2008 financial crisis. The memo outlines plans for Frost Bank to maintain public trust and transparency. It recommends: 1) ensuring documents proving Frost Bank's compliance with the law are available; 2) having executives give interviews to discuss issues in banking without criticizing other banks; 3) reminding the public that Frost Bank rejected a government bailout. The goal is for Frost Bank to position itself as a leader in the banking industry through transparency and financial education workshops.
Sarbanes Oxley & IT Compliance discusses the Sarbanes Oxley Act and its implications for IT departments. The act was passed in 2002 in response to several corporate accounting scandals. It aims to improve financial disclosures and prevent fraud. Compliance is costly for companies and affects departments like finance, IT, and operations. The document recommends establishing cross-functional teams, coordinating IT activities with overall security plans, and seeking technology solutions to reduce compliance costs over time through areas like document management and controls automation.
The document discusses the Sarbanes-Oxley Act and its implications for telecom companies. It requires executives to certify financial reports, establishes oversight of auditors, and aims to increase accuracy and reliability of corporate disclosures. For telecom companies, complying with SOX can help reduce revenue leakages, align data flows, and accelerate initiatives to plug leakage points.
Nick Rodelli has joined the Center for Financial Research and Analysis (CFRA) to lead their new Legal Edge research service focusing on analyzing how potential legal issues and decisions could impact companies' earnings and share prices. Rodelli believes the market often misprices stocks by not properly accounting for litigation risks and opportunities. He provides several examples where court cases could positively impact World Wrestling Entertainment, American Express and Qualcomm or negatively affect MasterCard and Sherwin-Williams. Rodelli's legal analysis aims to help investors identify underpriced and overpriced stocks.
Firms now face regulatory oversight from multiple authorities both domestically and internationally, creating challenges for managing regulatory risk. The proliferation of regulators has coincided with increased cross-border collaboration between regulators and higher fines for regulatory failures. As a result, firms can now face penalties from multiple regulators for a single breach based on various criteria, increasing compliance costs significantly. While some hope deregulation may reduce costs, continued cooperation between regulators and firms will be needed to ensure market stability and competitiveness.
The document provides an overview of US regulatory compliance for the securities industry. It discusses the history of securities regulation in the US following the 1929 stock market crash, including key legislation such as the Securities Act of 1933 and the Securities Exchange Act of 1934 which established the SEC. It also outlines the roles and functions of various compliance departments, including advisory services, training, monitoring, and fostering a culture of compliance.
Q & As for Accounting Officers and Members of CCs on the New Companies Act & ...Jayne Hunter-Rhys
This document lists over 50 questions related to close corporations under South African law. The questions cover topics such as membership requirements, financial reporting obligations, fiduciary duties of members, insolvency, conversion to other business structures, and deregistration.
Q & As for Accounting Officers and Members of CCs on the New Companies Act & ...Dr John W. Hendrikse
This document lists over 50 questions related to close corporations under South African law. The questions cover topics such as membership requirements, financial reporting obligations, fiduciary duties of members, insolvency, conversion to other legal structures, and deregistration.
Willkie Farr & Gallagher Corporate Crime Bulletin September 2017Paul Feldberg
Welcome to Willkie Farr & Gallagher’s Corporate Crime E-Bulletin. This publication provides an update on recent developments in the UK and the US with respect to financial crime and regulatory enforcement, including bribery and corruption, fraud, sanctions, money laundering, market abuse and insider dealing.
In a post-Financial Services Royal Commission (Hayne Royal Commission) world, the
regulatory landscape has changed fundamentally. The twin peaks model remains, but
the approach to enforcement is now summed up by the phrase, ‘adequate deterrence of
misconduct depends upon visible public denunciation of misconduct’.
ASIC has a new, more intensive supervisory approach—close and continuous monitoring
involves regularly placing ASIC staff onsite in major financial institutions to closely monitor
governance and compliance with laws. If successful, this program may be rolled out more
broadly. Its supervisory initiative, the Corporate Governance Task Force is undertaking
targeted reviews of corporate governance practices in large listed entities to allow it to
shine a light on ‘good’ and ‘bad’ practices observed across these entities.
Following a review of its enforcement strategy APRA has adopted a ‘constructively tough’
enforcement appetite. The Government has foreshadowed an extension of the Banking
Executive Accountability Regime (BEAR) beyond the banking sector
PRI_Engaging on anti-bribery and corruptionOlivia Mooney
This document discusses the business case for companies and investors to engage on anti-bribery and corruption issues. It outlines that corruption costs an estimated $2.6 trillion annually, or over 5% of global GDP. Corruption scandals can result in huge financial losses and reputational damage for companies. Regulatory enforcement is also increasing across jurisdictions, with the US and UK aggressively prosecuting companies. Deferred prosecution and non-prosecution agreements now require companies to pay large fines, admit wrongdoing, and implement compliance measures. As such, engagement helps companies strengthen anti-corruption controls to mitigate risks and supports investors' fiduciary duty to protect shareholder value.
The Culprit Is All Of Us By Ss Powell BarronsScott Powell
The government's involvement led to the economic crisis, not a lack of regulation. While the Bush administration made mistakes, deregulation was not one of them. In fact, many new financial regulations were passed during this time. The crisis was caused by a shift away from individual responsibility towards programs with implicit government backing, like Fannie Mae and Freddie Mac taking on risky subprime loans. Warnings about the risks created by these government sponsored entities went unheeded. Both political parties and all levels of government contributed to the problems through their actions.
Pearson Studios is hosting a concert titled "50 Winters Later" to commemorate the 50th anniversary of the legendary Woodstock music festival. The concert will take place outdoors at Pearson Studios and feature live performances by bands that played at the original Woodstock festival in 1969. Tickets are available now and expected to sell out quickly for this special event celebrating the history and legacy of Woodstock.
Sex Trade Of The United States & South East 1guest2122d1
Sex trafficking is the second largest criminal industry worldwide. Over 200,000 children in the US and 12 million people globally are trafficked each year for forced labor or sexual exploitation. While this problem occurs in many countries, Japan has faced criticism for its role. Japanese law was weak, classifying trafficking of foreign but not Japanese women as a crime. Strengthening Japanese laws to meet minimum US standards and ratifying international agreements could help address this widespread issue.
Christopher O'Toole has diverse healthcare experience starting in UK pharmaceutical sales and marketing in the Middle East, Africa, Latin America, and Asia before moving to the US for corporate pharma roles. He now co-owns Nine-TZ Healthcare Ventures, a business consultancy that provides career consulting, business deals, and expertise in new ventures. O'Toole has extensive experience and networks in the investment, drug development, and corporate pharma industries.
The Sarbanes-Oxley Act (SOX) aims to improve accuracy and reliability of corporate disclosures. For telecom companies, SOX compliance can help address revenue leakages through initiatives to analyze sources of loss and strengthen internal controls. Telecom companies can leverage SOX to optimize processes, accelerate revenue assurance programs, and enhance transparency in financial reporting.
President favours crowdfunding, but is it good enoughSilicon Halton
The President supports crowdfunding but questions if current proposals go far enough. Current securities laws prohibit general solicitation and limit participation to accredited investors, preventing startups from crowdfunding. Proposed legislation aims to allow crowdfunding but maintains complex rules, which may not be practical for small businesses to use. Simpler reforms, like allowing general solicitation and small investments from non-accredited investors under existing Rule 506, could enable effective crowdfunding without new complicated regulations.
This document summarizes discussions from three recent antitrust conferences:
1) The International Cartel Workshop focused on developments in international cartel investigations and leniency programs. Enforcers are increasingly cooperating across borders and emerging economies are strengthening penalties and leniency programs.
2) The Global Forum on Competition discussed the relationship between competition laws and corruption. Effective competition frameworks can increase competition and reduce corruption when they foster compliance and voluntary self-disclosure.
3) The ABA Antitrust Conference brought together practitioners to discuss recent developments in antitrust laws globally. Changes are happening rapidly in many jurisdictions, complicating compliance for multinational companies.
The Sarbanes-Oxley Act of 2002 was enacted in response to major corporate accounting scandals to increase corporate accountability and protect investors. It established new regulatory standards for public company boards, management, and accounting firms regarding issues like auditor independence, corporate governance, and financial disclosure. The Act created the Public Company Accounting Oversight Board to oversee auditing of public companies and established new criminal penalties for fraudulent behavior and retaliation against whistleblowers. Supporters believe it has helped restore confidence in financial markets, while critics argue it has increased regulatory burdens on companies.
Frost Bank is preparing for potential investigations into large banks by the Justice Department regarding the 2008 financial crisis. The memo outlines plans for Frost Bank to maintain public trust and transparency. It recommends: 1) ensuring documents proving Frost Bank's compliance with the law are available; 2) having executives give interviews to discuss issues in banking without criticizing other banks; 3) reminding the public that Frost Bank rejected a government bailout. The goal is for Frost Bank to position itself as a leader in the banking industry through transparency and financial education workshops.
Sarbanes Oxley & IT Compliance discusses the Sarbanes Oxley Act and its implications for IT departments. The act was passed in 2002 in response to several corporate accounting scandals. It aims to improve financial disclosures and prevent fraud. Compliance is costly for companies and affects departments like finance, IT, and operations. The document recommends establishing cross-functional teams, coordinating IT activities with overall security plans, and seeking technology solutions to reduce compliance costs over time through areas like document management and controls automation.
The document discusses the Sarbanes-Oxley Act and its implications for telecom companies. It requires executives to certify financial reports, establishes oversight of auditors, and aims to increase accuracy and reliability of corporate disclosures. For telecom companies, complying with SOX can help reduce revenue leakages, align data flows, and accelerate initiatives to plug leakage points.
Nick Rodelli has joined the Center for Financial Research and Analysis (CFRA) to lead their new Legal Edge research service focusing on analyzing how potential legal issues and decisions could impact companies' earnings and share prices. Rodelli believes the market often misprices stocks by not properly accounting for litigation risks and opportunities. He provides several examples where court cases could positively impact World Wrestling Entertainment, American Express and Qualcomm or negatively affect MasterCard and Sherwin-Williams. Rodelli's legal analysis aims to help investors identify underpriced and overpriced stocks.
Firms now face regulatory oversight from multiple authorities both domestically and internationally, creating challenges for managing regulatory risk. The proliferation of regulators has coincided with increased cross-border collaboration between regulators and higher fines for regulatory failures. As a result, firms can now face penalties from multiple regulators for a single breach based on various criteria, increasing compliance costs significantly. While some hope deregulation may reduce costs, continued cooperation between regulators and firms will be needed to ensure market stability and competitiveness.
The document provides an overview of US regulatory compliance for the securities industry. It discusses the history of securities regulation in the US following the 1929 stock market crash, including key legislation such as the Securities Act of 1933 and the Securities Exchange Act of 1934 which established the SEC. It also outlines the roles and functions of various compliance departments, including advisory services, training, monitoring, and fostering a culture of compliance.
Q & As for Accounting Officers and Members of CCs on the New Companies Act & ...Jayne Hunter-Rhys
This document lists over 50 questions related to close corporations under South African law. The questions cover topics such as membership requirements, financial reporting obligations, fiduciary duties of members, insolvency, conversion to other business structures, and deregistration.
Q & As for Accounting Officers and Members of CCs on the New Companies Act & ...Dr John W. Hendrikse
This document lists over 50 questions related to close corporations under South African law. The questions cover topics such as membership requirements, financial reporting obligations, fiduciary duties of members, insolvency, conversion to other legal structures, and deregistration.
Willkie Farr & Gallagher Corporate Crime Bulletin September 2017Paul Feldberg
Welcome to Willkie Farr & Gallagher’s Corporate Crime E-Bulletin. This publication provides an update on recent developments in the UK and the US with respect to financial crime and regulatory enforcement, including bribery and corruption, fraud, sanctions, money laundering, market abuse and insider dealing.
In a post-Financial Services Royal Commission (Hayne Royal Commission) world, the
regulatory landscape has changed fundamentally. The twin peaks model remains, but
the approach to enforcement is now summed up by the phrase, ‘adequate deterrence of
misconduct depends upon visible public denunciation of misconduct’.
ASIC has a new, more intensive supervisory approach—close and continuous monitoring
involves regularly placing ASIC staff onsite in major financial institutions to closely monitor
governance and compliance with laws. If successful, this program may be rolled out more
broadly. Its supervisory initiative, the Corporate Governance Task Force is undertaking
targeted reviews of corporate governance practices in large listed entities to allow it to
shine a light on ‘good’ and ‘bad’ practices observed across these entities.
Following a review of its enforcement strategy APRA has adopted a ‘constructively tough’
enforcement appetite. The Government has foreshadowed an extension of the Banking
Executive Accountability Regime (BEAR) beyond the banking sector
PRI_Engaging on anti-bribery and corruptionOlivia Mooney
This document discusses the business case for companies and investors to engage on anti-bribery and corruption issues. It outlines that corruption costs an estimated $2.6 trillion annually, or over 5% of global GDP. Corruption scandals can result in huge financial losses and reputational damage for companies. Regulatory enforcement is also increasing across jurisdictions, with the US and UK aggressively prosecuting companies. Deferred prosecution and non-prosecution agreements now require companies to pay large fines, admit wrongdoing, and implement compliance measures. As such, engagement helps companies strengthen anti-corruption controls to mitigate risks and supports investors' fiduciary duty to protect shareholder value.
The Culprit Is All Of Us By Ss Powell BarronsScott Powell
The government's involvement led to the economic crisis, not a lack of regulation. While the Bush administration made mistakes, deregulation was not one of them. In fact, many new financial regulations were passed during this time. The crisis was caused by a shift away from individual responsibility towards programs with implicit government backing, like Fannie Mae and Freddie Mac taking on risky subprime loans. Warnings about the risks created by these government sponsored entities went unheeded. Both political parties and all levels of government contributed to the problems through their actions.
Pearson Studios is hosting a concert titled "50 Winters Later" to commemorate the 50th anniversary of the legendary Woodstock music festival. The concert will take place outdoors at Pearson Studios and feature live performances by bands that played at the original Woodstock festival in 1969. Tickets are available now and expected to sell out quickly for this special event celebrating the history and legacy of Woodstock.
Sex Trade Of The United States & South East 1guest2122d1
Sex trafficking is the second largest criminal industry worldwide. Over 200,000 children in the US and 12 million people globally are trafficked each year for forced labor or sexual exploitation. While this problem occurs in many countries, Japan has faced criticism for its role. Japanese law was weak, classifying trafficking of foreign but not Japanese women as a crime. Strengthening Japanese laws to meet minimum US standards and ratifying international agreements could help address this widespread issue.
Christopher O'Toole has diverse healthcare experience starting in UK pharmaceutical sales and marketing in the Middle East, Africa, Latin America, and Asia before moving to the US for corporate pharma roles. He now co-owns Nine-TZ Healthcare Ventures, a business consultancy that provides career consulting, business deals, and expertise in new ventures. O'Toole has extensive experience and networks in the investment, drug development, and corporate pharma industries.
Webchutney is India's top digital agency, working with major brands like Unilever, P&G, HP, Airtel and Microsoft on online advertising, website design, mobile marketing and social media. According to a study by Webchutney of the top 500 advertisers in India, 82% allocate some spending to digital media but on average it is still only 5% of total advertising budgets, far lower than traditional media like television, print and radio. The study aims to understand perceptions of digital media and help brands make wise spending choices to keep up with the evolving landscape.
The document discusses the future of social networks and how they will evolve. It predicts that social networks will become ubiquitous and integrated across many online experiences. Friends and social profiles will be accessible everywhere on the internet through universal sign-in systems. Social graphs and user behavior data will be leveraged for targeted advertising within social networks and across the web. Privacy and permission standards must evolve to give users control over how their social data is used.
Tipping Point On Distrust Of Government Scott S Powell And Robert J Herbold...Scott Powell
The article argues that a tipping point has been reached where the American people deeply distrust the government and its legislative process. It claims that the government has become too focused on collectivism and expanding its role, undermining personal responsibility and choice. The piece advocates for health care reform that relies less on increased government bureaucracy and spending and more on free market principles and individual choice.
Este proyecto busca promover la participación de niños y adolescentes en la defensa de sus derechos a través de la creación de un sitio web. El proyecto se llevará a cabo en el Colegio SOS Hermann Gmeiner, donde se investigarán los derechos de los niños y adolescentes, se elaborará material digital sobre los mismos y se diseñará y desarrollará el sitio web. Luego, los estudiantes usarán el sitio para comentar sobre sus derechos y los derechos de los demás, y el proyecto será evalu
This document analyzes intercultural misunderstandings that occurred during conversations in English between a Spanish researcher and a Pakistani informant. It describes their differing conversational patterns and politeness conventions. Typical miscommunication problems are identified, such as non-understandings due to language ability, code switching, and differing world views. Solutions attempted include repetition, examples, definitions, and explanations. Both positive and negative consequences of miscommunications are discussed. The conclusion emphasizes the importance of addressing cultural clashes, encouraging language use despite problems, and teaching students to negotiate meaning.
API's, Freebase, and the Collaborative Semantic webDan Delany
A presentation about the state of the collaborative semantic web, including:
- What?
- Why?
- Where do we stand?
- A case study on Metaweb's Freebase project
The Sarbanes-Oxley Act (SOX) was implemented in 2002 in response to major corporate accounting scandals. SOX aimed to improve corporate governance and transparency by regulating auditor independence and requiring internal control assessment. It has resulted in more thorough audits but also increased expenses for businesses. While SOX has strengthened financial reporting, there is debate around its costs and some provisions may disproportionately burden smaller companies.
The PCAOB implemented new rules to provide more transparency around public company audits. The new rules require disclosure of the engagement partner's name, the names and locations of other accounting firms involved in the audit that conducted at least 5% of the total audit hours, and the aggregate participation of other firms. Previously, only the lead audit firm was disclosed. The new rules aim to give financial statement users more complete information about who is responsible for the audit opinion.
The Sarbanes-Oxley Act of 2002 was implemented to restore investor confidence in the wake of major corporate accounting scandals. It aims to improve corporate governance and financial disclosure. The act establishes new or enhanced standards for all U.S. public company boards, management, and public accounting firms. It requires companies and their executives to be more responsible and transparent in their financial reporting.
Chapter 4 The Institutionalization of Business Ethics 107.docxchristinemaritza
Chapter 4: The Institutionalization of Business Ethics 107
services use the same letter grades, but use various combinations of upper- and lowercase
letters to differentiate themselves.
As early as 2003, financial analysts and the three global rating firms suspected that there
were some major problems with the way their models were assessing risk. In 2005, Standard
& Poor’s realized that its algorithm for estimating the risks associated with debt packages was
flawed. As a result, it asked for comments on improving its equations. In 2006–2007 many
governmental regulators and others started to realize what the rating agencies had known for
years: Their ratings were not very accurate. One report stated that the high ratings given to
debt were based on inadequate historical data and companies were ratings shopping between
companies so as to obtain the best rating possible. It was found that investment banks were
among some of the worst offenders, paying for ratings and therefore causing conflicts of interest.
The amount of revenue these three companies annually receive is approximately $5 billion.
Further investigations uncovered many disturbing problems. First, Moody’s, S&P’s,
and Fitch had all violated a code of conduct that required analysts to consider only credit
factors, not “‘the potential impact on Moody’s, or an issuer, an investor or other market
participant.”’ Also, these companies had become overwhelmed by an increase in the volume
and sophistication of the securities they were asked to review. Finally, analysts, faced with
less time to perform the due diligence expected of them, began to cut corners.
SEC Chairman Mary Schapiro believes that the SEC must take more drastic measures to
implement oversight for credit-rating firms—a group that was largely blamed for not catching
risky activity in the financial sector sooner. Part of the problem, as Schapiro sees it, is that
credit rating firms are paid by the securities that they rank. This creates a conflict of interest
problem, and can affect the reliability of the ratings.23 No organization is exempt from criticism
over how transparent it is. While large financial firms have received most of the fury over risk
taking and executive pay, even nonprofits are now being scrutinized more carefully.24
THE SARBANES–OXLEY ACT
In 2002, largely in response to widespread corporate accounting scandals, Congress passed
the Sarbanes–Oxley Act to establish a system of federal oversight of corporate accounting
practices. In addition to making fraudulent financial reporting a criminal offense and
strengthening penalties for corporate fraud, the law requires corporations to establish
codes of ethics for financial reporting and to develop greater transparency in financial
reporting to investors and other stakeholders.
Supported by both Republicans and Democrats, the Sarbanes–Oxley Act was enacted to
restore stakeholder confidence after accounting fraud at Enron, WorldCom, ...
Senator Joe Biden argues that the costs of complying with the Sarbanes-Oxley Act are far outweighed by the costs of corporate fraud and lack of transparency. He provides evidence that Sarbanes-Oxley has restored investor confidence by improving financial reporting accuracy and accountability. While some compliance costs exist, most companies that avoid regulation through private equity deals have serious financial issues, and all public companies should ensure accurate financial reporting. Maintaining high standards of transparency and accountability is crucial for the integrity of US capital markets.
The document discusses the Sarbanes-Oxley Act of 2002, which established new regulations and standards for all US public company boards, management, and public accounting firms following several major corporate and accounting scandals. It details how the Act increased costs for public companies through requirements for internal controls, financial reporting, and auditor oversight. While intending to improve ethics, the costs also incentivized some companies to minimally comply rather than fully implement stronger ethics and controls. Violating the Act carries substantial civil and criminal penalties. Overall, the Sarbanes-Oxley Act established new legal and ethical standards for public companies following a loss of trust in financial markets.
The Sarbanes-Oxley Act of 2002 (SOX) was passed in response to several major corporate and accounting scandals. It aimed to increase corporate accountability and help restore investor confidence. Key provisions of SOX include the establishment of the Public Company Accounting Oversight Board to oversee audits of public companies, certifications of financial reports by CEOs and CFOs, restrictions on auditing and consulting services provided by accounting firms, disclosure of codes of ethics and whistleblower protections, among others. The goal of SOX was to better protect investors and improve the accuracy and reliability of corporate disclosures.
The Sarbanes-Oxley Act (SOX) was passed in 2002 in response to major corporate and accounting scandals to increase transparency and accuracy in corporate financial reporting. SOX holds CEOs and CFOs responsible for financial reports, requires external audits of public companies, and increases penalties for providing fraudulent financial information. A recent study found that CFOs of companies with strong internal financial controls saw increased compensation after SOX, while CFOs of companies reporting internal control problems incurred pay reductions. SOX also aimed to improve auditor independence and increase board oversight of executive activities.
The Sarbanes-Oxley Act (SOX) was passed in 2002 in response to major corporate accounting scandals to improve financial disclosure and transparency for public companies. Major sections of SOX include requirements for CEOs and CFOs to certify financial reports, for companies to establish internal controls on financial reporting, and to promptly disclose material changes. While SOX increased compliance costs for companies, it also aimed to restore investor confidence by improving accuracy of financial reporting and imposing penalties for violations. However, some critics argue that SOX places unnecessary regulatory burdens on companies.
The Sarbanes-Oxley Act (SOX) was passed in 2002 in response to several major corporate and accounting scandals such as Enron and WorldCom. It established new regulations and standards for public company boards, management, and public accounting firms. SOX aims to improve corporate governance and financial disclosures to protect investors and restore public trust in the securities markets. Key provisions of SOX include CEO/CFO certification of financial reports, requirements for external audits, auditor independence standards, and criminal penalties for compliance failures.
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The Cost Of Sarbanes Oxley Scott S Powell Barrons 5 3 05
1. May 2, 2005
Seeking a Cure for Sarbox
Eliminating frauds and errors is impossible; just trying is costly
By SCOTT S. POWELL
Sarbanes-Oxley is Thwarting Innovation and Free Markets
RUMBLINGS OF DESPAIR ABOUT SOMETHING called Sarbox might suggest that a new disease threatens us.
But it's actually slang for the Sarbanes-Oxley Act of 2002, a set of regulations intended to prevent the next Enron
or WorldCom by improving corporate governance. As Sarbox enters its first year of enforcement, some find that it
may be the most costly and counterproductive regulation ever imposed on public companies.
Sarbox dictates federal standards of corporate governance in areas previously left to states. Complying with Sarbox
will levy $35 billion of additional costs on Corporate America this year -- 20 times more than the SEC originally
estimated. Washington bureaucrats can now impose a one-size-fits-all approach to structure corporate boards,
determine their duties and those of officers, and set the standards and processes for internal controls. In so doing,
Sarbox defies common sense and the American tradition of competition to promote innovation and best business
practices.
How did this happen? In July of 2002, media coverage of destitute former employees contrasted with outlandish
executive excess, the collapse of audit firm Arthur Anderson and the bankruptcies of Enron and WorldCom sent the
stock market into freefall. Facing outraged investors and elections just four months away, Congress felt it had to do
something.
Few congressmen could oppose a bill that promised to restore
corporate accountability and Wall Street confidence. The Senate,
indeed, passed it, 99-0. Now we are reminded that laws passed by
unanimous vote generally prove to be bad legislation.
Sarbanes-Oxley does introduce some beneficial reforms, such as
establishing an oversight board for public accounting, increasing
penalties for fraud, providing more protections for whistleblowers,
requiring more transparency of insider stock sales and material
events, and reducing conflicts of interest in corporate governance.
But much of this good is outweighed by the cost of Section 404 of
Sarbox, which has empowered external auditors to regulate internal
company controls.
High-level fraud is still likely to go undetected because regulators
are looking in the wrong places. Section 404 audits focus on such
minutiae of operational details that they won't detect or prevent the
kind of fraud, such as capitalizing instead of expensing billions of
dollars, that took WorldCom down. Since the act passed, public
auditors' revenues have doubled, but their role as a second line of
defense against executive malfeasance and corporate crime is no better today than before.
Sarbox has rewarded auditors' previous failures with a full employment act for fussy inspectors and a bonanza of
new revenues, while accomplishing little to stop the next mega-corporate crime -- all paid for by shareholders. In
effect, Sarbanes-Oxley has facilitated the largest transfer of corporate wealth from the producing class to the
consuming class since the alleged Y2K computer glitch lined the pockets of computer and software consultants.
2. The impact of Sarbanes-Oxley extends beyond public companies. Mischief has now spread to the bond market,
where newly empowered auditors and regulators have ignored two decades of common-sense practice and forced
public companies to reclassify the accounting of auction-rate bond securities for no good purpose. The changes will
have no material affect on the investment income of corporations or the liquidity of the auction rate bonds in which
they invest. But it caused temporary instability in the $250 billion auction-rate note market, previously considered
by many to be one of the best and most convenient cash management venues on Wall Street. Many corporate
treasurers panicked and bailed out for no good reason, effectively reducing the investment income on their
companies' cash equivalents.
While the law pushed some companies to adopt new internal control systems, many have delayed systems
upgrades out of fear that the inevitable disruptions would precipitate a Sarbox compliance nightmare. Regardless,
the new regulations require corporations to document and certify internal controls every year -- annuitizing a
windfall for the Big Four accounting firms.
Privately, many CEOs and CFOs acknowledge the massive waste and misdirection of resources, but some remain
silent because 404 provides them a measure of protection against liability in the event that a system or human
error requires a material restatement. One S&P 500 corporate executive taking early retirement acknowledged that
404 has less to do with controls such as ERP (enterprise resource planning), ORM (operational risk management)
or BPM (business performance management), and everything to do with CYA (cover your ass).
Sarbox illustrates the madness of overregulation and the folly of Congress trying to legislate risk- and error-free
business operations. This might be tolerable were it a one-time cost and if it did not interfere with management's
flexibility and ability to run the business. "But with Sarbox nobody has any bandwidth to think about innovative
ideas or new models," says a top project manager at Cingular, the nation's largest cellular service provider. Jeffrey
Garten, dean of Yale's School of Management, predicts: "CEOs are going to become more risk-averse, and big
investments in risky projects will be held back."
New initiatives have gone right out the door at many companies, with project after project postponed or cancelled.
William Zollars, CEO of Yellow Roadway, the largest trucker in the U.S., says "it requires an army of people to do
the paperwork." In addition to diverting some 200 employees to work on Sarbox in the fourth quarter of 2004,
Zollars spent nearly $10 million on outside accountants and auditors, more than 3% of his firm's annual profit.
Yellow Roadway may be getting off cheaply, as some authorities put the average large company compliance price
tag at more than $35 million. Scott McNealy, CEO of Sun Microsystems, says the billions spent nationally on
Sarbanes-Oxley compliance weighs on the stock market and is like "throwing buckets of sand in the gears of a
market economy."
The greatest impact of Sarbox is on small public companies and venture capital start-ups, which generate more
than 70% of new jobs in the U.S. Compliance is more painful for smaller companies because costs are spread over
fewer heads and less revenue. As a result, not only are many start-ups hesitant to go ahead with IPOs, but
approximately one-fifth of existing small public companies in the U.S. have considered going private because of the
costs of Sarbox. The exodus also involves foreign-domiciled companies listed on one of the U.S. stock exchanges,
who now want to delist and get out of Dodge to avoid the high cost and wastefulness of Sarbanes-Oxley.
What can be done? The SEC may exercise its prerogative, make exceptions and use its exemptive power to render
optional the various regulatory provisions found excessive. But a better solution is in legislation recently introduced
by Rep. Jeff Flake (R-Ariz.) that treats all companies equally and simply makes Section 404 of Sarbanes-Oxley
voluntary. Firms could determine the appropriate level of controls by management discretion or by shareholder
vote, with full disclosure to the SEC and in annual reports.
Such a scaled-back Sarbanes-Oxley II would let shareholders and managers have more say than government in
deciding how corporate resources should be spent. And it would help keep the U.S. competitive, while it would
restore balance at home and reaffirm the primacy of free-market initiatives and innovation.
Heck, it might even be fun to go to work again.
____________________
Scott Powell is a Senior Vice President at RBC Capital Markets; a Board Member of BMG Seltec Inc., and a Visiting
Fellow at the Hoover Institution
3.
4. May 2, 2005
Seeking a Cure for Sarbox
Eliminating frauds and errors is impossible; just trying is costly
By SCOTT S. POWELL
Sarbanes-Oxley is Thwarting Innovation and Free Markets
RUMBLINGS OF DESPAIR ABOUT SOMETHING called Sarbox might suggest that a new disease threatens us.
But it's actually slang for the Sarbanes-Oxley Act of 2002, a set of regulations intended to prevent the next Enron
or WorldCom by improving corporate governance. As Sarbox enters its first year of enforcement, some find that it
may be the most costly and counterproductive regulation ever imposed on public companies.
Sarbox dictates federal standards of corporate governance in areas previously left to states. Complying with Sarbox
will levy $35 billion of additional costs on Corporate America this year -- 20 times more than the SEC originally
estimated. Washington bureaucrats can now impose a one-size-fits-all approach to structure corporate boards,
determine their duties and those of officers, and set the standards and processes for internal controls. In so doing,
Sarbox defies common sense and the American tradition of competition to promote innovation and best business
practices.
How did this happen? In July of 2002, media coverage of destitute former employees contrasted with outlandish
executive excess, the collapse of audit firm Arthur Anderson and the bankruptcies of Enron and WorldCom sent the
stock market into freefall. Facing outraged investors and elections just four months away, Congress felt it had to do
something.
Few congressmen could oppose a bill that promised to restore
corporate accountability and Wall Street confidence. The Senate,
indeed, passed it, 99-0. Now we are reminded that laws passed by
unanimous vote generally prove to be bad legislation.
Sarbanes-Oxley does introduce some beneficial reforms, such as
establishing an oversight board for public accounting, increasing
penalties for fraud, providing more protections for whistleblowers,
requiring more transparency of insider stock sales and material
events, and reducing conflicts of interest in corporate governance.
But much of this good is outweighed by the cost of Section 404 of
Sarbox, which has empowered external auditors to regulate internal
company controls.
High-level fraud is still likely to go undetected because regulators
are looking in the wrong places. Section 404 audits focus on such
minutiae of operational details that they won't detect or prevent the
kind of fraud, such as capitalizing instead of expensing billions of
dollars, that took WorldCom down. Since the act passed, public
auditors' revenues have doubled, but their role as a second line of
defense against executive malfeasance and corporate crime is no better today than before.
Sarbox has rewarded auditors' previous failures with a full employment act for fussy inspectors and a bonanza of
new revenues, while accomplishing little to stop the next mega-corporate crime -- all paid for by shareholders. In
effect, Sarbanes-Oxley has facilitated the largest transfer of corporate wealth from the producing class to the
consuming class since the alleged Y2K computer glitch lined the pockets of computer and software consultants.
5. The impact of Sarbanes-Oxley extends beyond public companies. Mischief has now spread to the bond market,
where newly empowered auditors and regulators have ignored two decades of common-sense practice and forced
public companies to reclassify the accounting of auction-rate bond securities for no good purpose. The changes will
have no material affect on the investment income of corporations or the liquidity of the auction rate bonds in which
they invest. But it caused temporary instability in the $250 billion auction-rate note market, previously considered
by many to be one of the best and most convenient cash management venues on Wall Street. Many corporate
treasurers panicked and bailed out for no good reason, effectively reducing the investment income on their
companies' cash equivalents.
While the law pushed some companies to adopt new internal control systems, many have delayed systems
upgrades out of fear that the inevitable disruptions would precipitate a Sarbox compliance nightmare. Regardless,
the new regulations require corporations to document and certify internal controls every year -- annuitizing a
windfall for the Big Four accounting firms.
Privately, many CEOs and CFOs acknowledge the massive waste and misdirection of resources, but some remain
silent because 404 provides them a measure of protection against liability in the event that a system or human
error requires a material restatement. One S&P 500 corporate executive taking early retirement acknowledged that
404 has less to do with controls such as ERP (enterprise resource planning), ORM (operational risk management)
or BPM (business performance management), and everything to do with CYA (cover your ass).
Sarbox illustrates the madness of overregulation and the folly of Congress trying to legislate risk- and error-free
business operations. This might be tolerable were it a one-time cost and if it did not interfere with management's
flexibility and ability to run the business. "But with Sarbox nobody has any bandwidth to think about innovative
ideas or new models," says a top project manager at Cingular, the nation's largest cellular service provider. Jeffrey
Garten, dean of Yale's School of Management, predicts: "CEOs are going to become more risk-averse, and big
investments in risky projects will be held back."
New initiatives have gone right out the door at many companies, with project after project postponed or cancelled.
William Zollars, CEO of Yellow Roadway, the largest trucker in the U.S., says "it requires an army of people to do
the paperwork." In addition to diverting some 200 employees to work on Sarbox in the fourth quarter of 2004,
Zollars spent nearly $10 million on outside accountants and auditors, more than 3% of his firm's annual profit.
Yellow Roadway may be getting off cheaply, as some authorities put the average large company compliance price
tag at more than $35 million. Scott McNealy, CEO of Sun Microsystems, says the billions spent nationally on
Sarbanes-Oxley compliance weighs on the stock market and is like "throwing buckets of sand in the gears of a
market economy."
The greatest impact of Sarbox is on small public companies and venture capital start-ups, which generate more
than 70% of new jobs in the U.S. Compliance is more painful for smaller companies because costs are spread over
fewer heads and less revenue. As a result, not only are many start-ups hesitant to go ahead with IPOs, but
approximately one-fifth of existing small public companies in the U.S. have considered going private because of the
costs of Sarbox. The exodus also involves foreign-domiciled companies listed on one of the U.S. stock exchanges,
who now want to delist and get out of Dodge to avoid the high cost and wastefulness of Sarbanes-Oxley.
What can be done? The SEC may exercise its prerogative, make exceptions and use its exemptive power to render
optional the various regulatory provisions found excessive. But a better solution is in legislation recently introduced
by Rep. Jeff Flake (R-Ariz.) that treats all companies equally and simply makes Section 404 of Sarbanes-Oxley
voluntary. Firms could determine the appropriate level of controls by management discretion or by shareholder
vote, with full disclosure to the SEC and in annual reports.
Such a scaled-back Sarbanes-Oxley II would let shareholders and managers have more say than government in
deciding how corporate resources should be spent. And it would help keep the U.S. competitive, while it would
restore balance at home and reaffirm the primacy of free-market initiatives and innovation.
Heck, it might even be fun to go to work again.
____________________
Scott Powell is a Senior Vice President at RBC Capital Markets; a Board Member of BMG Seltec Inc., and a Visiting
Fellow at the Hoover Institution
6.
7. May 2, 2005
Seeking a Cure for Sarbox
Eliminating frauds and errors is impossible; just trying is costly
By SCOTT S. POWELL
Sarbanes-Oxley is Thwarting Innovation and Free Markets
RUMBLINGS OF DESPAIR ABOUT SOMETHING called Sarbox might suggest that a new disease threatens us.
But it's actually slang for the Sarbanes-Oxley Act of 2002, a set of regulations intended to prevent the next Enron
or WorldCom by improving corporate governance. As Sarbox enters its first year of enforcement, some find that it
may be the most costly and counterproductive regulation ever imposed on public companies.
Sarbox dictates federal standards of corporate governance in areas previously left to states. Complying with Sarbox
will levy $35 billion of additional costs on Corporate America this year -- 20 times more than the SEC originally
estimated. Washington bureaucrats can now impose a one-size-fits-all approach to structure corporate boards,
determine their duties and those of officers, and set the standards and processes for internal controls. In so doing,
Sarbox defies common sense and the American tradition of competition to promote innovation and best business
practices.
How did this happen? In July of 2002, media coverage of destitute former employees contrasted with outlandish
executive excess, the collapse of audit firm Arthur Anderson and the bankruptcies of Enron and WorldCom sent the
stock market into freefall. Facing outraged investors and elections just four months away, Congress felt it had to do
something.
Few congressmen could oppose a bill that promised to restore
corporate accountability and Wall Street confidence. The Senate,
indeed, passed it, 99-0. Now we are reminded that laws passed by
unanimous vote generally prove to be bad legislation.
Sarbanes-Oxley does introduce some beneficial reforms, such as
establishing an oversight board for public accounting, increasing
penalties for fraud, providing more protections for whistleblowers,
requiring more transparency of insider stock sales and material
events, and reducing conflicts of interest in corporate governance.
But much of this good is outweighed by the cost of Section 404 of
Sarbox, which has empowered external auditors to regulate internal
company controls.
High-level fraud is still likely to go undetected because regulators
are looking in the wrong places. Section 404 audits focus on such
minutiae of operational details that they won't detect or prevent the
kind of fraud, such as capitalizing instead of expensing billions of
dollars, that took WorldCom down. Since the act passed, public
auditors' revenues have doubled, but their role as a second line of
defense against executive malfeasance and corporate crime is no better today than before.
Sarbox has rewarded auditors' previous failures with a full employment act for fussy inspectors and a bonanza of
new revenues, while accomplishing little to stop the next mega-corporate crime -- all paid for by shareholders. In
effect, Sarbanes-Oxley has facilitated the largest transfer of corporate wealth from the producing class to the
consuming class since the alleged Y2K computer glitch lined the pockets of computer and software consultants.
8. The impact of Sarbanes-Oxley extends beyond public companies. Mischief has now spread to the bond market,
where newly empowered auditors and regulators have ignored two decades of common-sense practice and forced
public companies to reclassify the accounting of auction-rate bond securities for no good purpose. The changes will
have no material affect on the investment income of corporations or the liquidity of the auction rate bonds in which
they invest. But it caused temporary instability in the $250 billion auction-rate note market, previously considered
by many to be one of the best and most convenient cash management venues on Wall Street. Many corporate
treasurers panicked and bailed out for no good reason, effectively reducing the investment income on their
companies' cash equivalents.
While the law pushed some companies to adopt new internal control systems, many have delayed systems
upgrades out of fear that the inevitable disruptions would precipitate a Sarbox compliance nightmare. Regardless,
the new regulations require corporations to document and certify internal controls every year -- annuitizing a
windfall for the Big Four accounting firms.
Privately, many CEOs and CFOs acknowledge the massive waste and misdirection of resources, but some remain
silent because 404 provides them a measure of protection against liability in the event that a system or human
error requires a material restatement. One S&P 500 corporate executive taking early retirement acknowledged that
404 has less to do with controls such as ERP (enterprise resource planning), ORM (operational risk management)
or BPM (business performance management), and everything to do with CYA (cover your ass).
Sarbox illustrates the madness of overregulation and the folly of Congress trying to legislate risk- and error-free
business operations. This might be tolerable were it a one-time cost and if it did not interfere with management's
flexibility and ability to run the business. "But with Sarbox nobody has any bandwidth to think about innovative
ideas or new models," says a top project manager at Cingular, the nation's largest cellular service provider. Jeffrey
Garten, dean of Yale's School of Management, predicts: "CEOs are going to become more risk-averse, and big
investments in risky projects will be held back."
New initiatives have gone right out the door at many companies, with project after project postponed or cancelled.
William Zollars, CEO of Yellow Roadway, the largest trucker in the U.S., says "it requires an army of people to do
the paperwork." In addition to diverting some 200 employees to work on Sarbox in the fourth quarter of 2004,
Zollars spent nearly $10 million on outside accountants and auditors, more than 3% of his firm's annual profit.
Yellow Roadway may be getting off cheaply, as some authorities put the average large company compliance price
tag at more than $35 million. Scott McNealy, CEO of Sun Microsystems, says the billions spent nationally on
Sarbanes-Oxley compliance weighs on the stock market and is like "throwing buckets of sand in the gears of a
market economy."
The greatest impact of Sarbox is on small public companies and venture capital start-ups, which generate more
than 70% of new jobs in the U.S. Compliance is more painful for smaller companies because costs are spread over
fewer heads and less revenue. As a result, not only are many start-ups hesitant to go ahead with IPOs, but
approximately one-fifth of existing small public companies in the U.S. have considered going private because of the
costs of Sarbox. The exodus also involves foreign-domiciled companies listed on one of the U.S. stock exchanges,
who now want to delist and get out of Dodge to avoid the high cost and wastefulness of Sarbanes-Oxley.
What can be done? The SEC may exercise its prerogative, make exceptions and use its exemptive power to render
optional the various regulatory provisions found excessive. But a better solution is in legislation recently introduced
by Rep. Jeff Flake (R-Ariz.) that treats all companies equally and simply makes Section 404 of Sarbanes-Oxley
voluntary. Firms could determine the appropriate level of controls by management discretion or by shareholder
vote, with full disclosure to the SEC and in annual reports.
Such a scaled-back Sarbanes-Oxley II would let shareholders and managers have more say than government in
deciding how corporate resources should be spent. And it would help keep the U.S. competitive, while it would
restore balance at home and reaffirm the primacy of free-market initiatives and innovation.
Heck, it might even be fun to go to work again.
____________________
Scott Powell is a Senior Vice President at RBC Capital Markets; a Board Member of BMG Seltec Inc., and a Visiting
Fellow at the Hoover Institution
9.
10. May 2, 2005
Seeking a Cure for Sarbox
Eliminating frauds and errors is impossible; just trying is costly
By SCOTT S. POWELL
Sarbanes-Oxley is Thwarting Innovation and Free Markets
RUMBLINGS OF DESPAIR ABOUT SOMETHING called Sarbox might suggest that a new disease threatens us.
But it's actually slang for the Sarbanes-Oxley Act of 2002, a set of regulations intended to prevent the next Enron
or WorldCom by improving corporate governance. As Sarbox enters its first year of enforcement, some find that it
may be the most costly and counterproductive regulation ever imposed on public companies.
Sarbox dictates federal standards of corporate governance in areas previously left to states. Complying with Sarbox
will levy $35 billion of additional costs on Corporate America this year -- 20 times more than the SEC originally
estimated. Washington bureaucrats can now impose a one-size-fits-all approach to structure corporate boards,
determine their duties and those of officers, and set the standards and processes for internal controls. In so doing,
Sarbox defies common sense and the American tradition of competition to promote innovation and best business
practices.
How did this happen? In July of 2002, media coverage of destitute former employees contrasted with outlandish
executive excess, the collapse of audit firm Arthur Anderson and the bankruptcies of Enron and WorldCom sent the
stock market into freefall. Facing outraged investors and elections just four months away, Congress felt it had to do
something.
Few congressmen could oppose a bill that promised to restore
corporate accountability and Wall Street confidence. The Senate,
indeed, passed it, 99-0. Now we are reminded that laws passed by
unanimous vote generally prove to be bad legislation.
Sarbanes-Oxley does introduce some beneficial reforms, such as
establishing an oversight board for public accounting, increasing
penalties for fraud, providing more protections for whistleblowers,
requiring more transparency of insider stock sales and material
events, and reducing conflicts of interest in corporate governance.
But much of this good is outweighed by the cost of Section 404 of
Sarbox, which has empowered external auditors to regulate internal
company controls.
High-level fraud is still likely to go undetected because regulators
are looking in the wrong places. Section 404 audits focus on such
minutiae of operational details that they won't detect or prevent the
kind of fraud, such as capitalizing instead of expensing billions of
dollars, that took WorldCom down. Since the act passed, public
auditors' revenues have doubled, but their role as a second line of
defense against executive malfeasance and corporate crime is no better today than before.
Sarbox has rewarded auditors' previous failures with a full employment act for fussy inspectors and a bonanza of
new revenues, while accomplishing little to stop the next mega-corporate crime -- all paid for by shareholders. In
effect, Sarbanes-Oxley has facilitated the largest transfer of corporate wealth from the producing class to the
consuming class since the alleged Y2K computer glitch lined the pockets of computer and software consultants.
11. The impact of Sarbanes-Oxley extends beyond public companies. Mischief has now spread to the bond market,
where newly empowered auditors and regulators have ignored two decades of common-sense practice and forced
public companies to reclassify the accounting of auction-rate bond securities for no good purpose. The changes will
have no material affect on the investment income of corporations or the liquidity of the auction rate bonds in which
they invest. But it caused temporary instability in the $250 billion auction-rate note market, previously considered
by many to be one of the best and most convenient cash management venues on Wall Street. Many corporate
treasurers panicked and bailed out for no good reason, effectively reducing the investment income on their
companies' cash equivalents.
While the law pushed some companies to adopt new internal control systems, many have delayed systems
upgrades out of fear that the inevitable disruptions would precipitate a Sarbox compliance nightmare. Regardless,
the new regulations require corporations to document and certify internal controls every year -- annuitizing a
windfall for the Big Four accounting firms.
Privately, many CEOs and CFOs acknowledge the massive waste and misdirection of resources, but some remain
silent because 404 provides them a measure of protection against liability in the event that a system or human
error requires a material restatement. One S&P 500 corporate executive taking early retirement acknowledged that
404 has less to do with controls such as ERP (enterprise resource planning), ORM (operational risk management)
or BPM (business performance management), and everything to do with CYA (cover your ass).
Sarbox illustrates the madness of overregulation and the folly of Congress trying to legislate risk- and error-free
business operations. This might be tolerable were it a one-time cost and if it did not interfere with management's
flexibility and ability to run the business. "But with Sarbox nobody has any bandwidth to think about innovative
ideas or new models," says a top project manager at Cingular, the nation's largest cellular service provider. Jeffrey
Garten, dean of Yale's School of Management, predicts: "CEOs are going to become more risk-averse, and big
investments in risky projects will be held back."
New initiatives have gone right out the door at many companies, with project after project postponed or cancelled.
William Zollars, CEO of Yellow Roadway, the largest trucker in the U.S., says "it requires an army of people to do
the paperwork." In addition to diverting some 200 employees to work on Sarbox in the fourth quarter of 2004,
Zollars spent nearly $10 million on outside accountants and auditors, more than 3% of his firm's annual profit.
Yellow Roadway may be getting off cheaply, as some authorities put the average large company compliance price
tag at more than $35 million. Scott McNealy, CEO of Sun Microsystems, says the billions spent nationally on
Sarbanes-Oxley compliance weighs on the stock market and is like "throwing buckets of sand in the gears of a
market economy."
The greatest impact of Sarbox is on small public companies and venture capital start-ups, which generate more
than 70% of new jobs in the U.S. Compliance is more painful for smaller companies because costs are spread over
fewer heads and less revenue. As a result, not only are many start-ups hesitant to go ahead with IPOs, but
approximately one-fifth of existing small public companies in the U.S. have considered going private because of the
costs of Sarbox. The exodus also involves foreign-domiciled companies listed on one of the U.S. stock exchanges,
who now want to delist and get out of Dodge to avoid the high cost and wastefulness of Sarbanes-Oxley.
What can be done? The SEC may exercise its prerogative, make exceptions and use its exemptive power to render
optional the various regulatory provisions found excessive. But a better solution is in legislation recently introduced
by Rep. Jeff Flake (R-Ariz.) that treats all companies equally and simply makes Section 404 of Sarbanes-Oxley
voluntary. Firms could determine the appropriate level of controls by management discretion or by shareholder
vote, with full disclosure to the SEC and in annual reports.
Such a scaled-back Sarbanes-Oxley II would let shareholders and managers have more say than government in
deciding how corporate resources should be spent. And it would help keep the U.S. competitive, while it would
restore balance at home and reaffirm the primacy of free-market initiatives and innovation.
Heck, it might even be fun to go to work again.
____________________
Scott Powell is a Senior Vice President at RBC Capital Markets; a Board Member of BMG Seltec Inc., and a Visiting
Fellow at the Hoover Institution
12.
13. May 2, 2005
Seeking a Cure for Sarbox
Eliminating frauds and errors is impossible; just trying is costly
By SCOTT S. POWELL
Sarbanes-Oxley is Thwarting Innovation and Free Markets
RUMBLINGS OF DESPAIR ABOUT SOMETHING called Sarbox might suggest that a new disease threatens us.
But it's actually slang for the Sarbanes-Oxley Act of 2002, a set of regulations intended to prevent the next Enron
or WorldCom by improving corporate governance. As Sarbox enters its first year of enforcement, some find that it
may be the most costly and counterproductive regulation ever imposed on public companies.
Sarbox dictates federal standards of corporate governance in areas previously left to states. Complying with Sarbox
will levy $35 billion of additional costs on Corporate America this year -- 20 times more than the SEC originally
estimated. Washington bureaucrats can now impose a one-size-fits-all approach to structure corporate boards,
determine their duties and those of officers, and set the standards and processes for internal controls. In so doing,
Sarbox defies common sense and the American tradition of competition to promote innovation and best business
practices.
How did this happen? In July of 2002, media coverage of destitute former employees contrasted with outlandish
executive excess, the collapse of audit firm Arthur Anderson and the bankruptcies of Enron and WorldCom sent the
stock market into freefall. Facing outraged investors and elections just four months away, Congress felt it had to do
something.
Few congressmen could oppose a bill that promised to restore
corporate accountability and Wall Street confidence. The Senate,
indeed, passed it, 99-0. Now we are reminded that laws passed by
unanimous vote generally prove to be bad legislation.
Sarbanes-Oxley does introduce some beneficial reforms, such as
establishing an oversight board for public accounting, increasing
penalties for fraud, providing more protections for whistleblowers,
requiring more transparency of insider stock sales and material
events, and reducing conflicts of interest in corporate governance.
But much of this good is outweighed by the cost of Section 404 of
Sarbox, which has empowered external auditors to regulate internal
company controls.
High-level fraud is still likely to go undetected because regulators
are looking in the wrong places. Section 404 audits focus on such
minutiae of operational details that they won't detect or prevent the
kind of fraud, such as capitalizing instead of expensing billions of
dollars, that took WorldCom down. Since the act passed, public
auditors' revenues have doubled, but their role as a second line of
defense against executive malfeasance and corporate crime is no better today than before.
Sarbox has rewarded auditors' previous failures with a full employment act for fussy inspectors and a bonanza of
new revenues, while accomplishing little to stop the next mega-corporate crime -- all paid for by shareholders. In
effect, Sarbanes-Oxley has facilitated the largest transfer of corporate wealth from the producing class to the
consuming class since the alleged Y2K computer glitch lined the pockets of computer and software consultants.
14. The impact of Sarbanes-Oxley extends beyond public companies. Mischief has now spread to the bond market,
where newly empowered auditors and regulators have ignored two decades of common-sense practice and forced
public companies to reclassify the accounting of auction-rate bond securities for no good purpose. The changes will
have no material affect on the investment income of corporations or the liquidity of the auction rate bonds in which
they invest. But it caused temporary instability in the $250 billion auction-rate note market, previously considered
by many to be one of the best and most convenient cash management venues on Wall Street. Many corporate
treasurers panicked and bailed out for no good reason, effectively reducing the investment income on their
companies' cash equivalents.
While the law pushed some companies to adopt new internal control systems, many have delayed systems
upgrades out of fear that the inevitable disruptions would precipitate a Sarbox compliance nightmare. Regardless,
the new regulations require corporations to document and certify internal controls every year -- annuitizing a
windfall for the Big Four accounting firms.
Privately, many CEOs and CFOs acknowledge the massive waste and misdirection of resources, but some remain
silent because 404 provides them a measure of protection against liability in the event that a system or human
error requires a material restatement. One S&P 500 corporate executive taking early retirement acknowledged that
404 has less to do with controls such as ERP (enterprise resource planning), ORM (operational risk management)
or BPM (business performance management), and everything to do with CYA (cover your ass).
Sarbox illustrates the madness of overregulation and the folly of Congress trying to legislate risk- and error-free
business operations. This might be tolerable were it a one-time cost and if it did not interfere with management's
flexibility and ability to run the business. "But with Sarbox nobody has any bandwidth to think about innovative
ideas or new models," says a top project manager at Cingular, the nation's largest cellular service provider. Jeffrey
Garten, dean of Yale's School of Management, predicts: "CEOs are going to become more risk-averse, and big
investments in risky projects will be held back."
New initiatives have gone right out the door at many companies, with project after project postponed or cancelled.
William Zollars, CEO of Yellow Roadway, the largest trucker in the U.S., says "it requires an army of people to do
the paperwork." In addition to diverting some 200 employees to work on Sarbox in the fourth quarter of 2004,
Zollars spent nearly $10 million on outside accountants and auditors, more than 3% of his firm's annual profit.
Yellow Roadway may be getting off cheaply, as some authorities put the average large company compliance price
tag at more than $35 million. Scott McNealy, CEO of Sun Microsystems, says the billions spent nationally on
Sarbanes-Oxley compliance weighs on the stock market and is like "throwing buckets of sand in the gears of a
market economy."
The greatest impact of Sarbox is on small public companies and venture capital start-ups, which generate more
than 70% of new jobs in the U.S. Compliance is more painful for smaller companies because costs are spread over
fewer heads and less revenue. As a result, not only are many start-ups hesitant to go ahead with IPOs, but
approximately one-fifth of existing small public companies in the U.S. have considered going private because of the
costs of Sarbox. The exodus also involves foreign-domiciled companies listed on one of the U.S. stock exchanges,
who now want to delist and get out of Dodge to avoid the high cost and wastefulness of Sarbanes-Oxley.
What can be done? The SEC may exercise its prerogative, make exceptions and use its exemptive power to render
optional the various regulatory provisions found excessive. But a better solution is in legislation recently introduced
by Rep. Jeff Flake (R-Ariz.) that treats all companies equally and simply makes Section 404 of Sarbanes-Oxley
voluntary. Firms could determine the appropriate level of controls by management discretion or by shareholder
vote, with full disclosure to the SEC and in annual reports.
Such a scaled-back Sarbanes-Oxley II would let shareholders and managers have more say than government in
deciding how corporate resources should be spent. And it would help keep the U.S. competitive, while it would
restore balance at home and reaffirm the primacy of free-market initiatives and innovation.
Heck, it might even be fun to go to work again.
____________________
Scott Powell is a Senior Vice President at RBC Capital Markets; a Board Member of BMG Seltec Inc., and a Visiting
Fellow at the Hoover Institution