Archive for the 'sarbanes-oxley' Category
Valerie J. Watnick wrote an interesting paper titled, “Whistleblower Protections under the Sarbanes-Oxley Act: A Primer and a Critique.” Check it out. The following abstract comes from bepress Legal Repository:
In the wake of scandals involving Enron Corporation, Arthur Andersen and other corporations, Congress enacted the landmark Sarbanes-Oxley Act of 2002, the Corporate and Criminal Fraud Accountability Act of 2002 (hereinafter the “Act” or “Sarbanes-Oxley”).This article critically examines the whistleblower protections afforded employees under Sarbanes-Oxley. Part I of the article considers the statutory language, the legislative history, and the regulations pursuant to the Act. Part II of the article examines recent decisions by the U.S. Department of Labor in Sarbanes-Oxley whistleblower cases (cases under the Act are initially adjudicated by the Department of Labor) and the overall framework for implementation of the law. The manner in which Sarbanes-Oxley relates to state law, particularly the doctrine of at-will employment, is discussed in Part III. In Part IV, the breadth and effectiveness of the Sarbanes-Oxley whistleblower protections and the existing legal and corporate cultural framework is considered. Finally, Part V proposes suggestions for improving current whistleblower protections under Sarbanes-Oxley so that they will accomplish their intended legislative purposes: that of protecting and encouraging corporate whistleblowers. Normatively, it appears that meaningful changes must occur on three levels to protect and encourage whistleblowers to “whistle” early on and to thereby prevent corporate fraud: i) there must be more exacting implementation of the existing Sarbanes-Oxley regulations; ii) administrative tribunals and courts must give effect to the intent of the statute: to actually protect whistleblowers; and iii) years after the “Enron wake-up call,” public companies must still reform their business cultures to encourage the free flow of information and reporting of wrongdoing. Whistleblower protection is a critical part of Sarbanes-Oxley and fraud prevention. Loyal employees with information to report about their corporate employer will only come forward readily – to protect investors and individual shareholders against corporate fraud – when they believe that their livelihoods will be protected in an immediate and real way. Only when all employees are watching – and no one is afraid to blow the whistle – will the incidence of fraud in public corporations drop to an acceptable level.
If you caught the April issue of the Harvard Business Review you might have stumbled across an aticle titled, “The Unexpected Benefits of Sarbanes-Oxley.“ Turns out SOX is helping companies:
- strengthened control environment
- more reliable documentation
- better, less burdensome compliance with other statutory regimes
- more standardized processes for IT and other functions
- reduced complexity of organizational processes
- better internal controls within partner companies
- more effective use of both automated and manual controls
- increased audit committee involvement
Who knew; via John Walz at Sarbanes-Oxley Blog.
Frank Buytendijk at Gartner reminds us that sometimes more corporate regulations lead to less (not more) corporate transparency:
Royal Dutch/Shell Oil yesterday announced its annual results. It also decided not to report predictions anymore on future oil production and on anticipated return on average capital employed. Although that’s valuable information, the company decided to stop the practice because while the predictions come true in the long term (or so they claim), on an annual basis, they were too “volatile.”
I think there have been many examples the last six months of CEOs, accompanied by their chief corporate counsel, disclosing less nonfinancial information instead of more. I’m currently in a fact-finding mode to see a pattern exists. According to this article in CFO magazine, a survey of 600 investor-relations executives revealed that nearly a third said their employers are considering ending the practice of offering profit projections to Wall Street analysts. Stay tuned …
Sarbanes-Oxley (SOX) has turned corporate governance on its head, changing the way companies select auditing firms, assess internal controls and conflicts of interest. More and more board members are saying no to new board appointments. When they do agree to join the fees they demand are significantly higher.
Recent studies are confirming this trend. Typical compensation ranges from $20,000 to $200,000 per year depending on size of the company and the members responsibilities. Compensation is also getting more complex including aspects such as:
- Basic retainer (plus per-meeting fees, telephonic meeting fees and committee fees)
- Life insurance, health plans, stock option plans and D&O insurance
John Bace, VP of Research at Gartner, reported that only 83% of companies had met the “letter” of the SOX requirement of establishing a code of ethics; but 25% of those companies say they won’t enforce those standards. John suggests that we need to get companies focused on the spirt instead of the letter of SOX,
Meeting the letter of the Sarbanes-Oxley law –- whatever that finally turns out to be –- is only the first step. Adhering to the spirit of the law is the only thing that will accomplish its ultimate goal. Too many enterprises are consumed with minutia and trivia in their chase of the compliance holy grail, and as this survey points out, most are failing to take seriously what caused all of this in the first place.
