CHIEF EXECUTIVES of large public companies have dealt with the Sarbanes-Oxley Act of 2002 and moved on. But nearly 80 percent of all publicly traded companies, accounting for 6 percent of total U.S. equity market capitalization, are still wrestling with it.
A moment of truth is at hand. The Securities and Exchange Commission established an Advisory Committee on Smaller Public Companies to advise it on how to apply Sarbox to these smaller companies. The advisory committee will make a final report to the SEC in late April but has released an early draft.
Although generally supportive of easing the pain of Sarbox, the draft report suggests a new test for whether Section 404, which mandates internal controls that can be tested by outside auditors, should be applied. Companies with less than $250 million in sales would get relief, but any company larger than that would not.
This is a sticking point and chief executives should be demanding that all these companies get relief from a hugely expensive, time-consuming process, which ultimately does not guarantee that fraud won’t occur.
Although Sen. Paul Sarbanes recently denied that Sarbox was enacted in haste, the evidence is overwhelming that the law overshot the mark.
The latest evidence is the results of Chief Executive’s polling of its readers. More than 90 percent of some 193 respondents said they would prefer to manage their companies as privately held entities, far from the scrutiny of the stock exchanges and SEC. (See Confidence Index, page 22.) Some readers said public companies have to spend 30 to 40 percent more of their time on compliance and financial market requirements than privately held counterparts. Rather than putting up with Sarbox, CEOs of smaller public companies are tempted to go private or stay private. That will bring less transparency to the markets, not more.
So keep up the heat on the SEC. And if the Free Enterprise Fund’s suit against the Public Company Accounting Oversight Board moves forward, there may be even more opportunity for relief from Sarbox. After all, if the PCAOB is ruled unconstitutional, then the law that created it will have to be revisited.
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
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1:00 - 5:00 pm
Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process
Executives expressed frustration with their current strategic planning process. Issues include:
Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns. They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning. Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process. This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented. If you are ready for a Strategic Planning tune-up, select this workshop in your registration form. The additional fee of $695 will be added to your total.
2:00 - 5:00 pm
Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations.
Limited space available.
10:30 - 5:00 pm
General’s Retreat at Hermitage Golf Course
Sponsored by UBS
General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.
The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.
