Category: Content management & strategy (Page 290 of 469)

According to an article in Monday’s Financial Times, China
Construction Bank, one of China’s "Big Four" state lenders, is
considering shelving its plans for listing its shares on the New York Stock
Exchange.  Presumably, the reason for skipping the NYSE listing is the
expense and trouble of compliance with Sarbanes-Oxley.

There could also be another side to the story, according to the FT
article. It is also possible that Sarbanes-Oxley would shed light in dark
corners that the bank might like to keep dark. Other Chinese banks have had
large amounts of assets tied up in non-performing loans and have run into
obvious problems with corporate governance.  For example, according to the FT
article, "Chinese media reported on Monday that two officials at Bank of China – another Big Four lender which is planning a $3-$4bn international IPO – had fled the country following the disappearance of up to Rmb1bn ($121m)." 
Yep, looks like an internal control problem to me.

So, maybe the problem with Sarbanes-Oxley is that it might do what we would
expect it to do — protect investors.

Anyway … China isn’t the only place outside the US to have trouble with
Sarbanes-Oxley.  According to a Tuesday Financial Times article, SEC
Chairman William Donaldson gave a speech that day at the London School of
Economics in which expressed willingness to try to find ways to ease the burden
of filing requirements for foreign companies.  Under current rules, foreign
filers must meet Section 404 requirements for reports filed after July 15 of
this year.

To me, this ties back into the thinking expressed in yesterday’s post on
"Bad
News or Benefit."  It seems likely that the details of SOX
compliance will get tinkered with over the next year or so as the SEC works to
find the balance between the cost of the regulations and the benefits that they
deliver.  If a company approaches Sarbanes-Oxley strictly from the
standpoint of meeting compliance requirements, these changes will be
frustrating, adding to the cost of compliance. 

On the other hand, if a company takes a broader view–moving beyond mere
compliance–and approaches internal control as part of a plan to improve
performance and governance–then the potential changes in deadlines and
modifications of requirements are just noise of on the side of the arena–the
goals and direction of the bigger game are not changed.

Last Friday’s evening edition of the American Public Media radio program
"Marketplace" had a short piece about Sarbanes Oxley.  (Here is a
link
to the program — I am not sure how long the link will be good ..). 
The gist of the story was that Sarbanes Oxley sure seemed like a good idea right
after Enron, but–now that companies are facing the effort and costs of
implementation–there is backlash leading to an effort to get Congress to change
the law.  According to this story, there is a significant lobbying effort
underway, led by the US Chamber of Commerce and others,  to make
"technical corrections" to SOX.  

There is a related story in today’s online edition of Business Week Online,
titled "A
Dream of Simpler Accounting," bylined by Amey Stone.  Stone’s
article covers a speech given by Don Nicolaisen, the Securities & Exchange Commission’s accounting chief,
at the New York State Society of Public Accountant’s conference yesterday.

Nicolaisen’s speech focused on his desire to simplify accounting rules by
moving away from detailed prescriptions to an approach based more on adherence
to principles.  (One of the problems with very detailed rules is that they
can encourage companies to "game" the system … finding ways to skirt
the edge of ethics and of sound accounting principles while still technically
staying within the bounds of the rules.  Another problem, of course, is
that detailed rules, universally imposed, can be onerous for many companies,
particularly mid-sized companies.)  But, as Amey Stone reported in her BW
article, Nicolaisen’s speech on principles soon devolved into a defense of the
very detailed rules associated with Sarbanes Oxley.  Nicolaisen reported
that he hears a lot of "noise" about Section 404 compliance.

I’d love to get a discussion going with some readers here as to whether SOX
is onerous and too detailed, or whether it is a necessary step in the direction
of guaranteeing standards of internal control over financial reporting. 
But, apart from that discussion, it seems that, for many companies, Sarbanes
Oxley is JUST about compliance, rather than about making an investment that will
pay off in improved performance.

"Compliance" just means that you have followed the rules and can be
(relatively) free from fear of sanctions and penalties.  But internal
control can be so much more than that.  It can be about improved processes,
increased efficiency, and more effective governance. When companies talk about
"compliance" initiatives, does that imply that they are more focused
on avoiding the negatives than on seeking return from the positives?

We have just posted the program for our Spring conference in San Francisco. Thanks to all who submitted a record number of great proposals – we wish we could accomodate them all. We are working on the Amsterdam conference now and there is still time to submit speaking proposals. We are co-locating this conference with XTech 2005 (formerly XML Europe), so proposals the complement XTech topics would be great.