SOX Center

Study finds small firms hit especially hard

A new University of Georgia study finds that the landmark Sarbanes-Oxley Act of 2002 and related rule changes of the major stock exchanges have dramatically altered the makeup of corporate boards, making them larger and more independent. The legislation also had the unintended effect of increasing director pay by more than 50 percent.

“Post Sarbanes-Oxley, the demand for directors by firms is up and the supply is down because the job is harder,” said study co-author Jeff Netter, a finance professor and chair holder in UGA’s Terry College of Business. “So what do you find” Pay is up – pay is way up.”

The Sarbanes-Oxley Act (SOX) was passed with near unanimous Congressional approval following the corporate scandals that brought down companies such as Enron and WorldCom. Among other things, the act and changes imposed by the New York Stock Exchange and Nasdaq sought to enhance corporate governance by promoting board independence and imposing greater responsibility and accountability on board members.

EurekAlert: UGA study finds surge in director pay following landmark Sarbanes-Oxley Act of 2002

Some Accuse SEC of Pushing Accounting Board, Tilting to Business in Rules Process

Complaints are rising that the Securities and Exchange Commission is muscling an accounting oversight board in a tilt toward business interests as the two agencies fashion rules for public companies and auditors under a landmark anti-fraud law.

In recent months the SEC and the independent board that supervises the accounting industry have taken differing approaches toward the key part of the Sarbanes-Oxley law that arose from the 2002 corporate scandals: the requirement for companies to assess the strength of their internal financial controls and to fix any problems.

SEC Chairman Christopher Cox urged, in a letter to the Public Company Accounting Oversight Board last fall, that it revise its rules for outside accountants under the requirement to adapt them to the size of the company whose books are being audited.

Yahoo!:SEC Accused of Muscling Accounting Board

America’s Most Trustworthy Companies

Alexander the Great is reputed to have said, “Upon the conduct of each depends the fate of all.”

More than two millennia on, the words of the Macedonian king echo true in the boardrooms of America, where the tainted winds of option backdating, insider trading and questionable pension accounting blow fitfully–along with the occasional gust still from the Enron-era corporate scandals.

Trust in free-market capitalism requires that shareholders and other stakeholders in the system have confidence in the probity of companies. Hence accounting standards and governance rules, and the regulators’ requirement that they be transparent.

Forbes: The Good Bookkeepers

The push by business interests to ease the laws and rules laid down in response to the 2002 corporate scandals is getting a serious hearing in Washington that is giving the idea heightened visibility.

An array of companies and business leaders have been making the case that the requirements born of the crisis of corporate malfeasance are overly onerous and costly.

A high-profile committee of business, legal and academic figures put forward proposals in November to clip back corporate governance rules, class-action lawsuits against companies and auditors, and criminal prosecution of companies by the government.

A second group, formed by the U.S. Chamber of Commerce, is releasing its report and recommendations Wednesday.

It calls for “quick and decisive adjustments in the U.S. legal and regulatory framework … to ensure that U.S. investor and business interests are best served in the global marketplace.” Among its key recommendations: Public companies should stop issuing quarterly earnings guidance and policymakers should seriously consider proposals to reduce the liability of accounting firms in litigation over company audits.

Montgomeryadvertiser: Sarbanes-Oxley under attack

The U.S. Treasury Department will host a conference March 12-13 to discuss the impact of the Sarbanes-Oxley Act and possible reforms, U.S. Treasury Secretary Henry Paulson said Thursday.

Businesses complain that Sarbanes-Oxley, a package of accounting and governance changes enacted by Congress after a wave of corporate scandals in the late 1990s, has proved too costly and difficult to follow. Paulson, speaking to the Economic Club of Washington, said overall, the changes have had a positive effect on business.

“The vast majority of the change, in my judgment, has been good,” Paulson said.

A look at recent scandals involving big payouts to company executives via backdated stock options stemmed from activities predating Sarbanes-Oxley, Paulson said. Sarbanes-Oxley reporting requirements discouraged such behavior later on, he said.

Morningstar: Treasury To Host Sarbanes-Oxley Conference March 12-13

From University News Services:

While corporate executives say their businesses are groaning under the weight of complying with Sarbanes-Oxley regulations, two University of Iowa business professors have found that most investors cheered the law during its early days.

Research by Sonja Rego and Haidan Li in the Tippie College of Business shows that stock market values increased significantly as a result of the reforms imposed by the Sarbanes-Oxley Act in July 2002. The two authors said that while the law may impose burdens on businesses, it has restored investor confidence in a market that was battered by a six-month long string of corporate scandals from Enron to WorldCom.

Their research also found that market values increased even more significantly for those corporations that were thought to have been the most aggressive in managing — and occasionally manipulating — their earnings in order to artificially inflate their stock price.

press-citizen: UI researches show gains from Sarbanes-Oxley

The city is losing its competitive edge and could give up its place as the financial capital of the world in as little as 10 years, a study has found.

The study was commissioned by Mayor Michael Bloomberg and Sen. Charles Schumer, who have been concerned about what they say is a growing threat to New York’s position as an international leader.

‘’Unless we take corrective steps, and soon, we’re going to see America’s leadership in global financial transactions dwindle, putting a chill on the nation’s economy and the city’s,'’ Bloomberg said at a City Hall news conference. ‘’That will spell fewer jobs and slower overall growth.'’

Bloomberg, a Republican and former CEO, and Schumer, a Democrat, outlined the report’s findings and recommendations, which include some changes specific to an anti-fraud law, known as the Sarbanes-Oxley Act, enacted in 2002 amid a spate of corporate scandals.

NYT: Report: NYC May Lose Top Financial Spot