CORPORATE POWER
CORPORATE POWERThe War Against Reform
After the massive financial meltdowns at Enron, WorldCom, and a host of other companies, Congress passed legislation to clean up corporate America. The law, called Sarbanes-Oxley, requires corporations to adopt more responsible accounting practices, publicly disclose more details about their finances and improve corporate governance. Three years later, unscrupulous members of the business community have launched an under-the-radar campaign to roll the reforms back. The battle pits Treasury Secretary John Snow, who appears willing to capitulate to the demands of big business (saying we need "a more balanced environment"), against SEC Chairman William Donaldson, who strongly defends the law. The outcome will have a profound impact on our ability to reduce future corporate scandals and, ultimately, the health of the American economy.
CORPORATE CRONIES SEEK OUSTER OF EFFECTIVE SEC CHAIRMAN: William Donaldson, a long-time Bush family friend who was installed as chairman of the SEC, has done an admirable job in using the new powers granted to the agency under Sarbanes-Oxley to reign in corporate abuse. Under Donaldson's leadership the SEC "has instituted a program to get ahead of problems by finding risks." Now Bush's corporate allies want him ousted. Several major industry groups – including the Business Roundtable, the U.S. Chamber of Commerce and the National Association of Wholesaler-Distributor – are "part of a quiet effort to convince the president that it's time for a new Securities and Exchange Commission chair." Thomas Donohue, president of the Chamber of Commerce, hasn't been so quiet. He described the implementation of Sarbanes-Oxley as a "runaway system of corporate destruction being run by [New York Attorney General] Eliot Spitzer and the people who work a the SEC." Donaldson says he is become the subject of criticism because some groups are "dedicated in deed and rhetoric to perpetuating a myopic focus on the status quo."
SARBANES-OXLEY GOOD FOR BUSINESS: Chicken Littles - like Donohue - claim that because of Sarbanes-Oxley, the sky is falling on corporate America. Business Week disagrees. A new analysis of the impact of the law by the magazine concludes that the law is "worth the trouble" for business. One benefit: "the intense scrutiny of accounting methods and internal controls has unearthed lingering problems in the way companies operate." Also "fixing weak financial controls has nipped a lot of the problems in the bud." Executives from GE and United Technologies credit the law for spurring improvements in their business practices. Philip Strand, a top executive at SAS (a large software company) argues "many public companies should be looking at the new Sarbanes-Oxley financial disclosure the same way most of us should view spinach – it's just plain good for you." There is extra work involved "but it is work that can provide long-term benefits for the enterprises that take the right approach."
SARBANES OXLEY GOOD FOR INVESTORS: One huge advantage of tighter controls on financial accounting: "greater confidence investors have in financial results." Ultimately, renewed investor confidence means a stock market that is more stable and produces better returns.
DIRTY TRICKS HAVE ALREADY BEGUN: Whatever the benefits, some companies are reflexively opposed to it and remain determined to do whatever is necessary to undermine Sarbanes-Oxley. In November, lobbyists for Fidelity Investments persuaded Sen. Judd Gregg (R-NH) to secretly slip in an amendment to a fast-moving spending bill "directing the Securities and Exchange Commission to justify a new [Sarbanes-Oxley related] rule that forces fund companies to appoint directors without ties to management." Reps. Michael Oxley (R-OH) and Barney Frank (D-MA) sent a letter to Gregg's committee saying that slipping the provision into the bill at the last minute, without debate, was "imprudent." The U.S. Chamber of Commerce – which argues vehemently against the right of individual consumers to protect their rights – has taken the SEC to court over the same rule.
After the massive financial meltdowns at Enron, WorldCom, and a host of other companies, Congress passed legislation to clean up corporate America. The law, called Sarbanes-Oxley, requires corporations to adopt more responsible accounting practices, publicly disclose more details about their finances and improve corporate governance. Three years later, unscrupulous members of the business community have launched an under-the-radar campaign to roll the reforms back. The battle pits Treasury Secretary John Snow, who appears willing to capitulate to the demands of big business (saying we need "a more balanced environment"), against SEC Chairman William Donaldson, who strongly defends the law. The outcome will have a profound impact on our ability to reduce future corporate scandals and, ultimately, the health of the American economy.
CORPORATE CRONIES SEEK OUSTER OF EFFECTIVE SEC CHAIRMAN: William Donaldson, a long-time Bush family friend who was installed as chairman of the SEC, has done an admirable job in using the new powers granted to the agency under Sarbanes-Oxley to reign in corporate abuse. Under Donaldson's leadership the SEC "has instituted a program to get ahead of problems by finding risks." Now Bush's corporate allies want him ousted. Several major industry groups – including the Business Roundtable, the U.S. Chamber of Commerce and the National Association of Wholesaler-Distributor – are "part of a quiet effort to convince the president that it's time for a new Securities and Exchange Commission chair." Thomas Donohue, president of the Chamber of Commerce, hasn't been so quiet. He described the implementation of Sarbanes-Oxley as a "runaway system of corporate destruction being run by [New York Attorney General] Eliot Spitzer and the people who work a the SEC." Donaldson says he is become the subject of criticism because some groups are "dedicated in deed and rhetoric to perpetuating a myopic focus on the status quo."
SARBANES-OXLEY GOOD FOR BUSINESS: Chicken Littles - like Donohue - claim that because of Sarbanes-Oxley, the sky is falling on corporate America. Business Week disagrees. A new analysis of the impact of the law by the magazine concludes that the law is "worth the trouble" for business. One benefit: "the intense scrutiny of accounting methods and internal controls has unearthed lingering problems in the way companies operate." Also "fixing weak financial controls has nipped a lot of the problems in the bud." Executives from GE and United Technologies credit the law for spurring improvements in their business practices. Philip Strand, a top executive at SAS (a large software company) argues "many public companies should be looking at the new Sarbanes-Oxley financial disclosure the same way most of us should view spinach – it's just plain good for you." There is extra work involved "but it is work that can provide long-term benefits for the enterprises that take the right approach."
SARBANES OXLEY GOOD FOR INVESTORS: One huge advantage of tighter controls on financial accounting: "greater confidence investors have in financial results." Ultimately, renewed investor confidence means a stock market that is more stable and produces better returns.
DIRTY TRICKS HAVE ALREADY BEGUN: Whatever the benefits, some companies are reflexively opposed to it and remain determined to do whatever is necessary to undermine Sarbanes-Oxley. In November, lobbyists for Fidelity Investments persuaded Sen. Judd Gregg (R-NH) to secretly slip in an amendment to a fast-moving spending bill "directing the Securities and Exchange Commission to justify a new [Sarbanes-Oxley related] rule that forces fund companies to appoint directors without ties to management." Reps. Michael Oxley (R-OH) and Barney Frank (D-MA) sent a letter to Gregg's committee saying that slipping the provision into the bill at the last minute, without debate, was "imprudent." The U.S. Chamber of Commerce – which argues vehemently against the right of individual consumers to protect their rights – has taken the SEC to court over the same rule.
posted by T. Scott Brineman at 9:11 AM
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