Sarbanes-Oxley Costs Exceed Benefits

coondoggie writes "Two years of compliance with the Sarbanes-Oxley Act (SOX) have shored up corporate accounting practices - but with lopsided costs compared to benefits gained. Bill Gradison, acting chairman of the Public Company Accounting Oversight Board (PCAOB), said that guidance the SEC issued last year and PCAOB's latest auditing standard may not be enough to clarify the rules that govern the reporting and auditing of internal controls. 'Based on the information we already have, it would seem that some further changes may be in order,' Gradison said."

Comments

Sarbanes is No good

[Anonymous Coward]

I have workd with SOX work - 95% of it is just bull work. The controls and testing for the IT portion is not adequate enough....and clients are heavily charged. The cost increase, which means that down the road, companies are not keen to have SOX work to be done....the work has to be changed.

I can go and on about the work, but clients are kinda screwed with lame ass testing done with auditors. All companies need to do is have their own checklist, match up polices and procedures and let auditors review them that is all...

Re:Sarbanes is No good

[IrquiM]

My company has employed 5 new people for the SOX compliance.

All we had to do was to get things we already do onto paper!
The biggest cost is the auditor review afterwards.

The problem comes when auditors do not read PCAOBs recommendations, and when companies hire external consultants to help them with the SOX compliance.

SOX is just "best practice" - don't complain! It's needed in a lot of companies!

BTW - my company is the 3rd larges in its type of work in the world, a multi bn. USD company.

Re:Sarbanes is No good

[plague3106]

All we had to do was to get things we already do onto paper!

Yikes; sounds like a lot of paper. I wonder if the real cost will be maintaining those documents, which is the case when you have classical development and reams of requirements documentation.

Re:Sarbanes is No good

[CodeArtisan]

If you all your auditors did was read your policies and procedures, and look at your checklists, then they were delinquent. The PCAOB requires that the auditor also performs its own *independent* test of the controls.

Having said that, I agree a lot of the SOX requirements are burdensome to say the least. The biggest problem was that during the first couple of years, the regulators wouldn't come out and say exactly what they though was required to fulfull 404 requirements. As a result, most folks took a conservative approach.

As an example, you are only required to document and test your key controls. A few clients I worked with, however, had decided to document and test every control they could identify in their organization, which resulted in an effort orders of magnitude greater than required.

Re:Sarbanes is No good

[try_anything]

Do you think there's an efficient way to force companies to practice honest accounting, or do we have to choose between these costs and commonplace large-scale fraud? (Please don't flame; it's an honest question.)

Misleading summary

[Raul654]

Here's the title of the article: "Execs tell regulators Sarbanes-Oxley costs exceed benefits". Here's the slashdot title: "Sarbanes-Oxley Costs Exceed Benefits". Notice the difference?
 
Sarbanes-Oxley is a *very good thing* - it exists to prevent another Enron. It makes CEOs criminally liable for when their companies cook the books. Amazingly, for some inexplicable reason, they don't seem to like it. Everyone reading this should go over to Netflix and add Enron: The Smartest Guys in the Room to their queues. It shows exactly how Enron was able to pull off the accounting shell-game that kept them afloat for years.

Re:Misleading summary

[Ohreally_factor]

Thank you. I was beginning to think I was confused about the purpose of Sarbanes-Oxley. Of course, some executives are going to complain that it's not helping profits. That's not its purpose. Its purpose is foreclose an avenue of fraud for the dishonest. Is this unfair for the honest guys? Maybe so, but on the whole, isn't it better to protect the investor and the marketplace from corporate criminals?

Re:Misleading summary

[Russ Nelson]

Nobody is saying that SarbOx has no benefits. Everybody is saying that SarbOx is too expensive for the benefits it returns.

Re:Misleading summary

[Bill Walker]

I think you're confusing the goal of the act with its actual ramifications. Sarbanes-Oxley amounts to a regressive cost of doing business. Small firms pay a disproportionately larger share of their revenues to comply: they have to hire a lawyer or auditing firm when they could have done the paperwork themselves in the past. Meanwhile, larger corporations merely pay more to their existing compliance teams.

Meanwhile, financial companies, especially hedge funds, are increasingly choosing to set up shop in London rather than New York/Connecticut to escape the burdens of Sarbanes-Oxley and SEC registration. Like them or not, these entities contribute a huge amount of money to local coffers: investors flock from all over the world to place capital in hedge funds, and they leave generally 2% of the investment and 20% of the profit annually with the fund managers.

No-one wants more catastrophes like Enron, but that doesn't mean we should throw the baby out with the bathwater.

Re:Misleading summary

[Bob_Robertson]

Exactly. This article from November says exactly the same thing:

http://blog.mises.org/archives/004345.asp

"In contrast, the CEO of Georgia Pacific explained that his company sold out to private Koch Industries in order to avoid mounting Sarbox costs."

and

"No doubt, a company that had poor controls may have improved them in order to comply with Sarbox. This does not mean that U.S. businesses in aggregate benefited from Sarbox. A law mandating a 45% increase in marketing spending might help some companies too, but it would cripple most others. Even companies with superior internal controls were forced by this perverse law to spend more money on internal controls."

Re:Misleading summary

[Anonymous Coward]

Everybody is saying that SarbOx is too expensive for the benefits it returns.

No they aren't. It's not everybody who is saying that, just the people who look at it and think, "Fuck! How they hell am I supposed to fund that?"

The rest of us went from thinking "Jesus Fucking-a-Llama Christ! That cock sucking texan just evaporated 10 billion dollars and he's living in a fucking mansion and my pension just disappeared." to "Don't like the costs? Too bad. Maybe you should have called bullshit on your peers when they were busy hiding the fact that they really weren't capable of running a business."

Re:Misleading summary

[Firehed]

Wouldn't it be even better to protect society from 'ethics criminals'? Oil companies are refusing to do anything to lower pump prices because it's not in the best interest of the shareholders, despite it being in the best interest of society as a whole. Captialism is bad for society unless society is a subset of shareholders. Yes, protecting investors from corporate dickheads is a good thing, but protecting everybody from monopolized money-loving dickheads must be a better thing.

I'm not disagreeing, I just think that our priorities are a bit out of whack.

Re:Misleading summary

[Anonymous Coward]

As one who is earning their master in accounting degree, one of the things we studied was that SOX would not have caught Enron, Worldcom, or Tyco. A number of the provisions are very good (and they give us accountants jobs - one of the only divisions of GM that is currently hiring is the internal audit department, which does most of the SOX 404 work), but they would not have caught the largest scandals.

Some of the provisions just aren't well thought out and create major problems because of the small number of players in the market - there are only 4 major accounting firms, and since a company has to rotate auditors every few years, and an auditor can't have recently done consulting work, it's very easy to get in a bad spot.

Re:Misleading summary

[Quantum Fizz]

Meanwhile, financial companies, especially hedge funds, are increasingly choosing to set up shop in London rather than New York/Connecticut to escape the burdens of Sarbanes-Oxley and SEC registration.

Using your same logic, here in the US we should also repeal child labor laws, environmental regulation, and occupational safety laws, merely because many US companies will open shop in in other countries where there are looser pollution regulation, safety laws, etc. Think of how much business the US economy is missing out on due to these regulations pushed by 'liberals'.

The scary thing is that a typical pro-big-business Republican would agree wholeheartedly with my paragraph, without sensing its sarcasm.

Re:Misleading summary

[Raul654]

If the problem is that there are only 4 accounting firms (and, for the reocrd, Arthur Anderson wasn't the only one with credibility issues) the free market is *easily* capable of correcting this problem.
 
As far as consultancy, they shouldn't be doing it! It was illegal until the 1999 repeal of the Glass-Steagall Act. The merger of finicial institutions created the conflicts of intersts that led directly to Enron.

Re:Misleading summary

[bnenning]

Oil companies are refusing to do anything to lower pump prices because it's not in the best interest of the shareholders, despite it being in the best interest of society as a whole.

No, it isn't. High prices encourage conservation and investigation of alternatives, which is exactly what's needed when demand exceeds supply.

Re:Misleading summary

[bolerobell]

It most definitely is a good thing. Another way to think about SOX is this way:

Enron, Tyco, Worldcom all used fraudulant accounting methods to inflate their books. If SOX hadn't been passed two things would've happened. First, investor confidence in the entire system would have collapsed. People would've started pulling their money out because, after Enron, a huge loophole in the system was found and all of a sudden no company with profit would have been considered safe. Second, every company in the US now knew of these "unique" accounting practices that could instanteously increase their profit margin. I'm not saying that all corporations would do this, but a sizable percentage would, especially if they perceived that there were low risk (remember, it took over 5 years to bring the Enron Executives to court).

It's like whenever a new exploit in a piece of software is found. Once it's existance becomes widespread, every scriptkiddie in the world starts to attempt to exploit it. Some people may not like it, but SOX is the patch to that exploit. Now, it has some bad side effects, but still those side effects aren't as bad as having the old loophole.

Re:Misleading summary

[greginnj]

I think you're confusing the goal of the act with its actual ramifications. Sarbanes-Oxley amounts to a regressive cost of doing business. Small firms pay a disproportionately larger share of their revenues to comply: they have to hire a lawyer or auditing firm when they could have done the paperwork themselves in the past.

When you write stuff like this, could you please also name the neocon website you're parroting it from? Your argument sounds a lot like the estate-tax debate, the rich defending their interests by claiming concern for the little guy.

Stop saying 'companies' like every mom and pop grocery has to do this. SOX only applies to publicly-held companies. And publicly-held companies had to be audited by an external auditor, even before SOX.

Re:Misleading summary

[Raul654]

"First, investor confidence in the entire system would have collapsed. People would've started pulling their money out because, after Enron, a huge loophole in the system was found and all of a sudden no company with profit would have been considered safe." - this is not true. Warren Buffet, the richest investor in the planet, refuses to invest in any buisness that he doesn't understand. Accounting sheets don't have to be difficult to read - it depends on the accounting methods used. If a buisness is using a hard-to-understand one, stay the hell away and you won't get burned.

Enron, in point of fact, was a buisness that *nobody* understood, and that's why people loved it. They said people had trouble understanding their buisness model because it was so far ahead of its time. Instead, they were playing a compliated shell game to hide their debts

Re:Misleading summary

[greginnj]

Parent: an accounting firm (big 4 or smaller) can either perform external audits for a company, or consult for them. Not both. There are very strict independence rules governing this. And please explain your statement about Enron -- it doesn't make sense to me.

Grandparent: Companies do not have to change auditors (meaning audit firms) every few years. That's the last thing they want to do. Assuming the auditing firm is independent (and MANY heavy regs govern that), they only benefit from the knowledge base the audit firm retains. The rule is that the same partner from the audit firm can't keep the client more than 5 years -- so the client rotates to another partner at the same audit firm.

Re:Misleading summary

[jcr]

Sarbanes-Oxley is a *very good thing* - it exists to prevent another Enron

No, it's killing a butterfly with a cannon. Because one company was run by a bunch of crooks, every other public company has to vastly increase their costs, which is money that isn't spent of improving their products, hiring more workers, or cutting prices to their customers.

Let me point out that it was the market that brought Enron down, not the government.

-jcr

Re:Misleading summary

[Maxo-Texas]

SOX has reduced my productivity by 75%.
I spend the rest of the time (15 to 20 hours per project) filling out several forms that I didn't used to have to fill out, doing self-audits to confirm I filled out the forms, waiting for approval of my forms before I can go to the next step, etc.

Meanwhile- the execs in my company can write a $20,000 check without even a counter-signature from another exec and much larger checks with a counter-sig from *one* other exec with NO required paperwork of any kind and they get paid literally millions of dollars while our stock has declined constantly in price for years.

Why the heck sox means the "Massive Paperwork for Programmers" is beyond me.

And then when we have a high priority project that a big executive wants fast-- we toss all the paper work out the window and backfill it afterwards (even putting links to empty documents that will be filled in later).

Yea right- sox is a very good thing-- NOT. We already had laws against fraud. All we have to do is start ENFORCING them.

Re:Misleading summary

[Raul654]

The points I am making are that Enron's collapse was as bad as it was in significant (if not exclusive) part because a number of finicial companies (J.P. Morgan Chase, Citigroup, Credit Suisse First Boston, Canadian Imperial Bank of Commerce, Bank of America, Merrill Lynch, Barclays, Deutsche Bank and Lehman Brothers according to this) were telling investors to buy Enron stock at the same time they were heavily invested in Enron. This is a clear conflict of interest. The auditors (Arthur Anderson) were caught an a different conflit of interest - they started thinking their fiduciary responsibility was to their client (Enron) instead of their investors (who got screwed when Arhtur Anderson got wiped out by the market, a punishment it richly deserved).

Re:Misleading summary

[thejeffer]

You're forgetting an important fact. A LARGE percentage of America is knowingly or unknowingly a shareholder in oil companies. You know that retirement plan you have? Your 401k? Those mutual funds you bought? Guess what they include as part of your portfolio? That's right. Shares in those horrible oil companies. The American public loses sight of the fact that while high gas prices certainly hurt your pocketbook right now, there's a silver lining... in the long run, it's actually building up your retirement fund.

Now that's not to say I'm happy with the oil companies. Along with a responsibility to please your shareholders, an ethical company also has a responsibility to act for the benefit of society when they can. In the oil companies' cases, this would mean pumping some of those huge profits into R&D and building new refineries so that we have the capacity to keep artificial shortages from happening.

Just saying though... with the amount of people who hold shares in these companies either directly or through mutual funds, the actions that are best for shareholders might actually be those that are best for society in the long run.

Re:Misleading summary

[EweLambGeo]

I strongly disagree with this objection. Sarbox, IMHO, is the most poorly conceived and implemented piece of government regulation to come out of Washington since the Carter adminstration attempted to allocate gasoline deliveries at the retail level. In case you were not driving then, gas stations ran out of gas all over the US. It was awful, especially if you needed to get somewhere. What the SEC hath now wrought is a set of undefined requirements which it has told the entire American corporate world to go implement or be ... severly punished.

While slashdotters may derive a justified modicum of rightously deserved glee in this state of affairs - who here hasn't been given like orders - the economic waste on the national scale is so hideous that it needs airing. Never before has so much money been wasted on useless butt-plate.

The concept here is that corporate processes need to be audited independently to prevent fraud and malfeasance. Wonderful idea. What the SEC people had no clue about, however, was just how many processes there are churning away every day in a normal company. There are thousands! If you want to monitor the pain Sarbox is inflicting, subscribe to the alerts from CFO.com. For example, one company just found out it would have to pay its auditors - that's right, the people who failed to catch Enron's malfeaseance - $50,000 a year just to audit its employees vacations. That's not so much alone, but when you multiply it by everything going on in a company, the costs are absolutely humongous. And all of this money is going to the people who not only failed to prevent Enron but told them how to do it. Something is seriously wrong here.

Proportionately, the costs for smaller businesses are much higher (typically 20x). This has an anti-technology bias that hurts all of us in technology and eventually the whole economy. Because our start-ups are small and Sarbox denies us capital, we will not be able to hire and develop. This is bad Kool-Aid.

The supporters of Sarbox are: a) Big Labor - they are more successful unionizing big/old companies, fail miserably with high-tech startups, hate us, and actively seek to ruin us, b) Auditors - they make the money from this regulation, c) Regulators - from their perspective, regulation is always good and Sarbox means hiring many more of them.

The losers are everyone else, especially us in the tecnhology sector. I'm developing technology that could make corporate treasuries more efficient by increasing their control of liquid assets. I cannot sell it because of Sarbox and all its distractions. Ironically, corporate treasuries are so involved in dealing with the worthless regulatory minutia of Sarbox that they cannot invest the time to evaluate systems that would actually improve their control of corporate liquid assets.

I wish I could conclude this rant by recommending what we should do, but I am not as politically astute as our foes. All I can say is let's hope for the best and maybe someone out there in the political world will get a clue.

Re:Misleading summary

[Raul654]

Yes, Enron was brought down by the market. In fact, that's how pretty much every finincial scandal ends - the company that caused it implodes and the government is left to pick up the pieces. The point of SOX is to prevent a repeat performance by a company using the same not-quite-illegal/barely-illegal tactics that Enron used.

Re:Misleading summary

[Raul654]

So what you are saying basically amount to - giving an honest accounting of a company is expensive? Ok, so be it. Companies that find a way to do this cheaply and effeciently will prosper (and have their standards adopted by others), and ones that don't will tank. And in the future, investors won't again have to worry about CEOs lying on balance sheets in order to cheat the market (at least not using the same bag of tricks that worked for Enron/Worldcom/Tyco/et al).

Re:Misleading summary

[Brandybuck]

it exists to prevent another Enron

The executives of Enron broke the law. Let me repeat, in case you didn't hear: the executives of Enron broke the law. As a law abiding citizen, who naturally obeys the law just because it is there, that's undoubtedly an alien concept. It certainly is to me. So I will say it again. The executives of Enron broke the law.

Criminals do not obey the law. Sarbanes-Oxley won't prevent another Enron. It's just another law that criminals will ignore but which will punish the law-abiders.

Re:Misleading summary

[aclarke]

The idea of corporate accountability is a good thing. The implementation of SOX in many companies is an utter nightmare.

Large companies have the economy of scale to spend money and do a proper SOX implementation. For smaller companies, this is simply cost prohibitive. One company I worked at briefly left me sitting around for probably 30-40% of my day because there was no work "authorized" for me to do. I would go almost every day to my boss and ask for something to do and he would tell me straight up that there was nothing I was allowed to do. I saw opportunities all over the company and would specifically ask him if I could do x or y and would be told no. He was scared "someone" would catch me doing unauthorized work, since we had already had one poor SOX audit.

I went to a director in the marketing division and asked him if I could help him out in some specific ways until he hired for some of his positions and got a similar response. Because I was in IT, I wasn't ALLOWED to do any work for marketing. Because of SOX.

Everything we did had a paper trail, which again in theory is a good thing. Except, because of SOX, everything has TWO "paper" trails: one on the intranet, and one in filing cabinets. The old, electronically based system was not 100% SOX compliant so they had to do a paper one for SOX until <insert unreasonably expensive SOX system /> was installed.

Sure, a lot of these problems are due to poor, inept management. However, it hamstrung the 80% of us who WANTED to do a great job (including my boss) and just couldn't. This is the spectre of SOX, and why it's hurting many medium-sized publicly traded businesses.

I'm glad to be working for privately held "me" again :-)

Re:Misleading summary

[Stoolio]

I agree totally about throwing the baby out with bathwater.

I was pulled from the job I had loved for twelve years and put in charge of SOX IS/IT compliance for our office.

Although I was successful in bringing our office up to compliance, I resigned a year later due to hating my job.

Before SOX, our office ran in the black at the tune of 15-20% each month. During the first year of SOX we ran the same amount in the red.

The endless teleconferences/meetings, new SOP's, and hours devoted to figuring out what the heck all the legal speak meant obliterated productivity to an already lean staff. We had to hire new people and train them to do work for those assigned to SOX.

It did not help that my GM fought me every step of the way and could not afford to give me an increase in pay due to the office losing so much money.

I turned the ordeal into a positive learning experience and a nice addition to my resume.

The best lesson I learned? Stick to working for myself and bartending.

Re:Misleading summary

[synx]

I think the parent was fairly clear - you are not getting what you think you're paying for. You are _not_ getting a honest accounting of a business. Only the appearance of one. Remember, that the external auditing companies that are being paid for this stuff are the exact same ones that were complicit in the Enron thing.

Some of the SOX stuff is reasonable - although most large companies are already doing that. But some of the other parts are more or less insane. Like the infamous section 404 - everytime I push a particular piece of software I need to audit that. I need to do extra paperwork that does not really improve anything, since I'm not doing anything new but filing out some bit of electronic retardedness.

The section 404 stuff is ridiculous. Why do we need individual audits of software pushes? I push a 1 line change, I need to fill out a SOX thing.

In the end, all the big problems happen at the exec/policy/corp level. And those people are always part of the "good-old-boys club" (Not girls, BOYS. Girls not allowed. You know, period stuff and all of that.). If you are part of the club, you don't get punished, unless you severely embarrass everyone else as Lay and Enron did.

We need better corporate governance. This legislation was ill concieved and simpleminded. Just the way the crafters wanted it - because SOX does not prevent Enron 2. Just the way it was designed. Looks like it should be effective though.

Re:Misleading summary

[Anonymous Coward]

The best lesson I learned? Stick to working for myself and bartending.

Or at least check to see if the company is a publicly held company before applying. SOX SUCKS!

Re:Misleading summary

[bolerobell]

You point to Warren Buffett as indicitive of the average investor? He isn't. That's why he's "Warren Buffet".

Re:Misleading summary

[Ohreally_factor]

Well, you didn't come out and say it, so I'm not sure if it's what you have in mind, but if you mean that the very laws that give "life" to corporations need to be re-examined, then yes, you've got an excellent point. I'd go even further, and say that the very assumptions that out culture and civilization are based on need to be re-evaluated.

But who is to do such a re-evaluation? The politicians? Heh. No, it's got to be you and me. And is there any hope in hell of pushing through such changes of underlying assumptions, given that the ones who don't want the assumptions changed have guns, money, and inertia on their side? No. So, the best either you or I can do is to make changes in our own little lives, and maybe help those we come into contact with change their own assumptions, if they want it.

Ever thought of getting off the grid? Or if that's impossible, moving as much of one's life off the grid, becoming less dependent on the grid, leaving a smaller footprint?

Meanwhile, legislation like S-O might help people from getting ripped off.

Re:Misleading summary

[Anonymous Coward]

No doubt, a company that had poor controls may have improved them in order to comply with Sarbox. This does not mean that U.S. businesses in aggregate benefited from Sarbox. A law mandating a 45% increase in marketing spending might help some companies too, but it would cripple most others. Even companies with superior internal controls were forced by this perverse law to spend more money on internal controls.

Ageed. My company kept track of how much time was being spent on SarbOx compliance. From the start of 2004 through the first two months of 2005, we had recorded well over 100,000 hours dedicated solely towards performing SarbOx related tasks... What a waste.

Re:Misleading summary

[Raul654]

You know, criminals used machine guns all the time in the 1920s and 1930s. And then they were outlawed. And you know what? You don't hear too much about criminals using them anymore. (There was that one out in LA in the late '90s but beyond that not much). So did outlawing the machine guns turn those criminals into law-abiding citizens? No, probably not. Did it limit the amount of damage they can do? Oh yes.

With SOX prevent any future finincial scandals? No, certainly not. Will it limit the amount of damage a dirty corporation can do? Absolutely. Might CEOs who would otherwise have gone dirty think twice when faced with committing black-letter felonies? Yep, I think so.

Re:Misleading summary

[Raul654]

Warren Buffet's system is plain freaking common sense - if you don't understand it, don't risk your money on it. If all investors practiced this not-so-subtle bit of wisdom, Enron would never have gotten a dollar from the investors they ultimately defrauded.

Re:Misleading summary

[Bob_Robertson]

"What a waste."

Exactly. Sorry you had to post as an anon, that comment was a real one and deserves respect.

Re:Misleading summary

[drsmithy]

Oil companies are refusing to do anything to lower pump prices because it's not in the best interest of the shareholders, despite it being in the best interest of society as a whole.

No, it's not. Low pump prices encourage excessive usage (which has a whole bunch of negative direct and indirect flow-on effects, and very few positive ones) and discourage R&D into, and production of, alternative fuels.

(Incidentally, if you're American, you have no concept of what the words "high fuel prices" mean.)

Personally, I have no issue with petrol prices here in Australia (AU$1.35ish/L), and quite frankly wouldn't have a huge problem with them going up more (I wouldn't expect it would would my lifestyle re: vehicle usage until it hit at least $2/L). Every time I think about some North-shore soccer mum paying AU$120-odd to fill up her X5 she uses to drive the few kilometres between home, school and the supermarket, it makes me smile.

Re:Misleading summary

[HTTP Error 403 403.9]

Stop saying 'companies' like every mom and pop grocery has to do this. SOX only applies to publicly-held companies. And publicly-held companies had to be audited by an external auditor, even before SOX.

That's not fair, you are using facts and reasonable logic to prove your point.

This is Slashdot, please return to using hyperbole, straw man arguments and ad hominem attacks.

Re:Misleading summary

[Cyno]

No-one wants more catastrophes like Enron

No one seems to care that global warming could cause more catastrophes like Enron. The value of the US dollar could cause catastrophes as well..

Responsible business means more than simply counting the money, its about making sure your environment will support business, so the next generation will be able to count the money..

Capitalists are too busy chasing the carrot in front of their face to look off in the distance at the truck heading straight for them..

When my life is threatened by your way of life I become very concerned with you and the way you think. I don't like the fact you believe in an afterlife. This, to me, means you think you're immortal. I don't like that you believe the world is going to end. How can I trust you not to help it end, just to prove your point?

Its frustrating.

Re:Misleading summary

[Firehed]

Well, you didn't come out and say it, so I'm not sure if it's what you have in mind, but if you mean that the very laws that give "life" to corporations need to be re-examined, then yes, you've got an excellent point. I'd go even further, and say that the very assumptions that out culture and civilization are based on need to be re-evaluated.

Yep, that's pretty much my goal in life. The age-old system of having *countries* doesn't even make that much sense anymore, considering that it just slows down a global economy (ever ordered expensive stuff from overseas? you get double-taxed and have stuff sitting at customs for weeks - loads of fun). I'd love to be "off the grid" - I feel no need to be bound by outdated bullshit-covered laws that keep the BigCorps rich and everyone else as a target of a frivolous lawsuit. If it were an option, I'd happily buy some island and start my own country so I wouldn't have to live in vague concern of being sued for owning an iPod.

Re:Misleading summary

[bogjobber]

Wouldn't it be even better to protect society from 'ethics criminals'? Oil companies are refusing to do anything to lower pump prices because it's not in the best interest of the shareholders, despite it being in the best interest of society as a whole.

I couldn't disagree more on this particular issue. I think that the end of cheap oil is a godsend at this point. After almost thirty years of fruitless bickering and partisan debate since the oil crisis of the 70's, the market is finally forcing us to wake up to the fact that we are way too dependent on foreign sources of energy. Precisely because of the way big oil is jerking the common folks around (which IMO is just deserts) we are now seriously approaching alternative fuel sources. The oil companies are not "ethics criminals" because they sell a product which is at a very high demand for a very high price. Maybe if we were in the middle of a natural disaster or other situation where it was apparent exploitation was happening it would be different, but right now they are charging a fair price.

Re:Misleading summary

[Dachannien]

The thing is, the link between cost and (public) benefit for child labor laws, environmental regulations, and occupational safety laws is plainly visible, and in most cases the cost of compliance is proportional to the size of the business. Not so for Sarbanes-Oxley, where the cost of compliance is, in general, greatest as a proportion of revenues for smaller businesses than for large ones, and where the public benefit is practically undetectable for small businesses as opposed to large ones. It's getting to the point where the motivation to small publicly-traded corporations is to either incorporate in a foreign country or to go private just to save costs.

I believe that Sarbanes-Oxley addresses a problem that needs to be addressed, but does so without consideration for the needs of the companies expected to stay in compliance with it. Low-income citizens are given disproportionately large tax breaks to account for their disproportionately greater needs, so why shouldn't something similar apply to small businesses when it comes to Sarbanes-Oxley?

Re:Misleading summary

[Afrosheen]

I'm not buying the nonsensical argument that the media and big oil keep throwing the public about 'demand exceeding supply'. There are no supply and demand economics at work here. If that were the case, then one would have to assume that over the last 5 years, US consumption has tripled, because prices have tripled. Generally prices go up if demand can't be met, and demand not being met is generally because supply is low, or the supplier is restricting output to drive prices up.

  The big oil companies have more excuses than a hound dog has fleas. Last year it was 'oh no teh hurricanes!?', this year it's 'oh snap what about Iran?!' and 'hey we have to switch over to a summer blend, it's teh expensiveness!'. It's all bullshit. If the oil companies were really having such a difficult time making money (i.e. their supply is low and costs are up therefore we're paying extra), why would Chevron and Exxon post their highest earnings IN HISTORY over the last few quarters? Exxon's profit equalled Bill Gates' total value a few quarters ago. 41 billion dollars. If the market is controlling prices, then big oil wouldn't be raking in ungodly earnings, they'd have a steady cash influx just like every other year. The truth is that with the GOP at the reigns, and two oilmen running the White House, it's open season on consumers when it comes to gas prices.

  Sorry to get political at the end there, but it's not hard to make the connection between the Bush family, Saudi nationals, a VP (Cheney) that sits on the board at Halliburton and our current situation.

Re:Misleading summary

[benna]

Of course SarbOx is not profitable for businesses. If it were, it would already have been implemented before congress passed the law. The point is that the burdensome new procedures have positive externalities which outweigh the increased costs.

Re:Misleading summary

[JKConsult]

As has already been pointed out in another response to your post, Enron didn't create their mess all by themselves. Arthur Andersen, as both their auditor and their consultant, did as much, if not more, that led to Enron's downfall. But even if it had been Enron all by themselves (meaning that they would have had to present false books to Andersen, and cover up the existence of the shell companies [called 'Raptors' internally by Enron] when actual physical checks were made, which is much harder to do than you think), the severity of the resulting disaster made the people, the government, and the FASB think about the overall climate of business. They found that it was lacking, and they made a move to fix it.

While I think that the argument that Sarbanes-Oxley is deficient in solving the issue is false, I will listen to arguments to the contrary. Any attempt to claim that a public company should not be doing everything in their power to ensure that their books are correct and that they are following GAAP (along with other compliance) is ludicrous. It doesn't benefit the public, and in the long term, it rarely benefits the shareholders. Is any company going to be perfect? Of course not. But for GE to complain that spending a tenth of a percent of their pre-tax income on one of the most important fundamental shifts in regulation is not merely laughable, it would give me long pause if I were a major shareholder or potentially one.

They're certainly allowed to bitch about the cost (and they always will, no matter what it is), but when it's as generally as low as it is, especially for corporations the size of GE, it makes one wonder about their dedication to proper reporting. And that's not a good thing to be wondering about.

Re:Misleading summary

[NoOneInParticular]

Smallcap businesses are hurt by it. I work for a 300 people public company that develops software for businesses. Since Sox came into effect, the company spends as much money on accounting as they do on software development. The company has two choices now: grow rapidly so that the accounting overhead (4 million per quarter) becomes less significant, or go private.

The enormous amount of regulations coming with Sox are chilling, and it simply is out of proportion for the damage small and midcap companies can do. This particular company is now running break-even. It would be profitable if not for Sox.

Re:Misleading summary

[Bob_Robertson]

"The point is that the burdensome new procedures have positive externalities which outweigh the increased costs."

By what measure? Where is your data?

I am completely serious. If there are "positive externalities", demonstrate them.

My contention is that, with less reliance on government to shield losses, such improvements (if they truly are) to accounting practices would be enacted specifically because they had positive results.

There are a whole lot of marketing departments who would just love to put a positive spin on how the business is now doing more to protect their customers/shareholders/the_public, rather than simply obeying another burdensome regulation.

Bob-

Re:Misleading summary

[Bob_Robertson]

It's not just "execs", it's also "auditors" according to the article.

Considering that "auditors" have incentive to like having more work to do, why would "auditors" be saying it's a waste of time and money?

It certainly is in the interests of "execs" to minimize costs, and Sarbox certainly doesn't do that. But I think there is more to it simply because the auditors are also involved in nay-saying the legislation.

Bob-

Re:Misleading summary

[Znork]

"US consumption has tripled, because prices have tripled."

The actual price isnt directly related to the amount consumed; For fairly unelastic demand it's driven by the price at which the poorest consumers cannot any longer afford it and will go without. Then factor in things like the demand from Chinas richer classes, and you'll see that the price can rapidly rise without any increase in the amount consumed.

Of course, this imbalance will adjust itself eventually. At first we'll see inflation as companies and workers pass the costs on to the consumers, but as they're usually the same people this doesnt work out well in the long run, so the Fed will raise the interest rates. Then a whole load of companies will go bankrupt, people get unemployed, we get a recession, and demand shrinks, rapidly lowering prices as speculators fall over eachother to get out of the oil bubble.

But of course you're right there's also a whole lot of quasi-monopolistic shenanigans going on; the generation who learned from this mistake during the 70's oil crisis probably isnt alive to point out the idiocy to their offspring, or they plan to cash out before the crash.

Re:Misleading summary

[Anonymous Coward]

Couldn't agree more.

How could stopping company execs from running off with everyone's money be "too expensive"? Explain that to the employees who lost everything.

Re:Misleading summary

[gowen]

Let me point out that it was the market that brought Enron down, not the government.

Actually, it was good, old-fashioned investigative journalism that brought Enron down.

The market is what made Enron massive, because it took its lies at face value, and the investors were so blinded by the appeal of a quick profit they didn't even stop to think "Doesn't this seem too good to be true?"

Re:Misleading summary

[killjoe]

Maybe the open source advocates ought to join in that crowd too. After all if a corporation is spending 50,000 auditing vacations maybe they will try to save money by migrating to linux.

Re:Misleading summary

[killjoe]

You talk as if economics was anything other then pure junk science and that there were things like cause and effect in economics. There isn't. economics is a less predicatble subset of psychology.

Let me illustrate. When Clinton was president the US had a surplus. Over the next handful of years the govt not only squandered that surplus but got itself into massive debt. On top of all that there were terrorist attacks, two wars, and a long and painful occupation of a another country costing 300 billion dollars (which is surely under accounted).

Now you might think that something like would have had some effect on the economy. Maybe it would effect unemployment, maybe the stock market, maybe the strength of the dollar, maybe the interest rates, maybe the rate of savings, maybe consumer spending, maybe business spending. Some effect, any effect at all.

Nope. Nothing. Nada. Zilch. Zip. You can spend money like a drunken sailor, grow the size of the govt, wage war, squander your savings and dig yourself into debt, spend hundreds of billions of dollars one non productive warfare and there is no effect whatsoever.

You see. Economics is junk science. It's no different then a hippie who places crystals on a computer to prevent it from crashing.

Re:Misleading summary

[Bloke down the pub]

There are no supply and demand economics at work here. If that were the case, then one would have to assume that over the last 5 years, US consumption has tripled, because prices have tripled.

I suggest you read your economics 101 course notes and see if you can find the bit where the laws of supply and demand mention the word "linear".

Re:Misleading summary

[jcr]

Any attempt to claim that a public company should not be doing everything in their power to ensure that their books are correct and that they are following GAAP (along with other compliance) is ludicrous.

What's ludicrous is tossing off a phrase like "everything in their power", without considering the costs of the measures in question.

-jcr

Re:Misleading summary

[jcr]

You know, criminals used machine guns all the time in the 1920s and 1930s. And then they were outlawed. And you know what? You don't hear too much about criminals using them anymore.

You've left out a few details, like prohibition getting repealed, the mob becoming organized enough to put an end to outright warfare between rivals for particular rackets, the realization that machine guns aren't nearly as accurate as many other weapons, not to mention that they're extremely difficult to conceal, and that they're really not the best weapon for the purpose of attacking an individual in an urban setting.

Umm... Yeah.. The gangsters must have given them up because they're illegal. Sure, that's the ticket.

Will it limit the amount of damage a dirty corporation can do? Absolutely.

Dream on.

-jcr

Re:Misleading summary

[Dominic_Mazzoni]

I'm not buying the nonsensical argument that the media and big oil keep throwing the public about 'demand exceeding supply'. There are no supply and demand economics at work here. If that were the case, then one would have to assume that over the last 5 years, US consumption has tripled, because prices have tripled.

Except that oil prices are based on global demand, not U.S. demand, and global demand is going up very fast because of developing nations like China and India.

Generally prices go up if demand can't be met, and demand not being met is generally because supply is low, or the supplier is restricting output to drive prices up.

Or how about a major supply source being interrupted by, oh I don't know, a war? Iraq oil production is still not back to the levels it was before the war.

Re:Misleading summary

[Compulsion]

Making sweeping judgements from a 101 textbook is inaccurate in any field. No one is arguing with S. Hawking using the Newtonian stuff you learn in Physics 101. No one is writing enterprise software using the techniques from CIS101 (well, some people are, but that's a different rant). So why is it that you're using introductory concepts to diagnose a ridiclously complicated system?

Predicting macroeconomics, or even fiding causal relationships is a craps game. While many of us computer scientists would like to be able to point to a book somewhere and say "No! NO! It's teh linear! RTFM!", that simply is not the case.

Re:Misleading summary

[bonius_rex]

Sarbanes-Oxley is a *very good thing*

On the contrary...

Sarbanes-Oxley blows several goats. It is the reason I need 4 screen shots, 15 pages of paperwork, 25 signatures, and a papal edict to change a fucking login script.

Since SOX went into effect, my productivity has been reduced by a factor of about four. It honestly takes four hours to do the paperwork for every one hour of actual work.

SOX is an abomination, and I very much doubt it does anything to prevent Enron-type shenanigans.

Re:Misleading summary

[sasdrtx]

The really scary thing is that a typical pro-union socialist Democrat thinks that passing a law banning something actually stops it.

Re:Misleading summary

[shilly]

This is dumb. And naive. First off, companies do exploit the positive things they are doing to protect people -- nearly every major company produces environment and corporate responsibility reports, and that is usually but the tip of a large iceberg of marketing. Secondly, the one area that is specifically not included in those reports is stuff about finance. There are two reasons for that: one, it's covered in annual reports and accounts, 10Ks etc. Two, going above and beyond in this particular area would be as likely to raise suspicions (methinks the lady doth protest too much...) as to garner positive reactions.

Completely free markets don't work. For most of the world (Mises excepted), that's uncontroversial economics. Game theory suggests that at least someone will try to win by du(m)ping (on) others, whether through non-disclosure of pertinent financial facts or selling dangerous products or something else. And we might not want to let the market punish them after the fact, when the facts might be a few billion in economic damages or thousands of people with asbestos-induced cancer.

Re:Misleading summary

[Imsdal]

Oh boy, did you ever miss the point!

What GP tried to tell you was that "linear" *isn't* in the book. Supply and demand curves can look widely different depending on the good, but assuming that either curve is linear is almost always incorrect.

Also, even if both the supply and the demand curves are in fact linear, that doesn't mean that the tripling of the price should imply that supply or demand has changed by a factor of three. That obviously depends on the slope of the curves.

Re:Misleading summary

[Maximilio]

Because one company was run by a bunch of crooks

One company? Was Tyco the same company? How about WorldCom? Were they just another division of Enron? Arthur Anderson? Global Crossing? Adelphia? All divisions of that one company.

Maybe it's like the McGregor guy. He built a very fine bar. But do they call him McGregor the bar builder? No! He built a very fine fence. Do they call him McGregor the fence builder? No way! But you fuck one goat . . .

Re:Misleading summary

[Bloke down the pub]

I'm glad someone is awake! I was originally intending to add something like "What? You never did Econ 101? Really? I'd never have guessed!" but lunch got in the way.

Re:Misleading summary

[Politburo]

The executives of Enron broke the law. Let me repeat, in case you didn't hear: the executives of Enron broke the law.

Considering that Ken Lay and Jeff Skilling are still on trial, this is not true, in the legal sense.

Re:Misleading summary

[Bob_Robertson]

"This is dumb. And naive."

Naive maybe. Dumb? Do you understand what that word actually means?

"Completely free markets don't work."

Yes, they do, and more efficiently than regulated ones. If regulation solved problems, there would be no pollution, no corruption, no scandals.

If I promised that hitting yourself in the head with a hammer would feel better than not, and you hit yourself and discovered I was wrong, you would not hit yourself in the head again. Government has promised to solve problems with regulation and those problems have not been solved. Why do you continue to hit yourself in the head with government?

"Game theory suggests..."

Game theory is based upon zero-sum outcomes. Someone wins, someone loses. The more that others lose, the more one wins, so of course there are people who will dump on others for the greatest gain.

Economics is not a zero-sum game. Value is created specifically because of trade. A rock in the ground is worthless. A diamond ring is worth lots of money. At each stage in the process the new owner has traded some of their treasure for something they value even more, while the old owner has traded something they valued less than they gained in treasure. The final transfer very likely does not involve any transfer of material treasure yet each party deems that they have gained from the exchange.

Those in real life, not games, gain the greatest amount by having the freedom to trade what they wish when they wish. Both sides of the transaction gain the greatest tangable and intangible reward by satisfying their wants in the most mutually satisfactory way.

"...when the facts might be a few billion in economic damages or thousands of people with asbestos-induced cancer."

Demonstrate harm, prosecute harm. If asbestos causes cancer, prosecute those who knowingly continue its use. If someone does not know, educate them and then prosecute if they do not change their materials (because then it's knowingly acting to cause harm).

Now, remind me again how a free market doesn't work?

Re:Misleading summary

[Imsdal]

First, investor confidence in the entire system would have collapsed. People would've started pulling their money out because, after Enron, a huge loophole in the system was found and all of a sudden no company with profit would have been considered safe.

Yes, just like every stock market in the rest of the world immediately collapsed because only the US had the great fortitude to implement such a brilliant law.

Oh, wait! That didn't happen! If anything, the opposite happened.

Second, every company in the US now knew of these "unique" accounting practices that could instanteously increase their profit margin. I'm not saying that all corporations would do this, but a sizable percentage would, especially if they perceived that there were low risk (remember, it took over 5 years to bring the Enron Executives to court).

So, could you tell us a little about these practices? Also, could you tell us a little bit about why the Enron executives are in a trial right now?

The truth of the matter is that what Enron did wasn't legal before SOX. SOX may, or may not, help discover cases like that sooner, but do note two things:

1. SOX won't stop another company from "pulling an Enron" just like a law on speed limits won't prevent someone who wants to drive 200 mph from doing that.

2. There are costs associated with the enforcement of all laws, and SOX adds more costs than any other law I can think of. If we added one million traffic cops, speeding would be completely eliminated because everyone speeding would be caught. Since speeding is a major cause of accidents, and accidents cost money to society, society would be better off. Surely you can spot the fallacy of that argument?

The argument isn't "everything SOX does and stand for is completely evil". The argument is that costs are bigger than benefits. Such an argument can only be settled by actually looking at costs.

Re:Misleading summary

[Bloke down the pub]

If all investors practiced this not-so-subtle bit of wisdom, Enron would never have gotten a dollar from the investors they ultimately defrauded.

And the Web 2.0 boom and the subsequent crash would never have happened.

Re:Misleading summary

[Imsdal]

Considering that Ken Lay and Jeff Skilling are still on trial, this is not true, in the legal sense.

Some people have pleaded guilty to some crimes (or at least misdemeanors?) so it is indeed true that Enron executives broke the law.

Re:Misleading summary

[CrimsonAvenger]

You know, criminals used machine guns all the time in the 1920s and 1930s. And then they were outlawed.

Umm... no. They weren't. An expensive (for the day) license was required to buy one, but that's all. And since criminals can't legally own firearms of any sort, obviously the license won't be much of a deterrent.

Note that the same conditions still apply - machine guns (fully automatic weapons) are legally purchasable if you have the appropriate license (and pay the appropriate fees.

Note further that during the ten years of the "Assault Weapon Ban", that those same conditions applied - machine guns (fully automatic weapons) were legally purchasable if you had the appropriate license (and paid the appropriate fees). Of course, semi-automatic weapons were illegal then....

Re:Misleading summary

[Anonymous Coward]

I'm not sure what planet you live on, or what color the sky is on your world, but the rest of the planet has come to the conclusion that Sarbanes-Oxley is ridiculous. 99.9% of the companies out there are good companies, and are paying hundreds of thousands to millions of dollars to comply with overblown, over-complicated, demanding, bureaucratic paperwork.

It's so overwhelming that you'll see one of three things:

Companies are simply going to raise costs and pass it on to the consumer.

Companies will move offshore

Companies will cease to exist.

The companies that survive? Big corporations, or privately held businesses exempt from reporting.

If you think that bureaucratic paperwork driving business out of this country is a good thing, I'd like you to explain to the hundreds of thousands of workers that work for companies that now are faced with one of the 3 choices above. How do you think they're going to feel when their employer moves, folds, or watches their sales plummet because they can't compete on price? We're already seeing manufacturing jobs headed to China. Other outsourcing initiatives are headed to Mexico and India.

And the news media and the socialist lefties like to blame big business for the jobs moving offshore. Hmm. I wonder why this is? Maybe they should just go bankrupt and let the taxpayer pick up the tab.

And the worst part? People like you (and all the other leftie socialists) think governement over-regulation is a good thing. Go over to Germany, Denmark, France, and look at their unemployment rates. Then look at the social atmosphere. They're almost in rebellion. Taxes will go up because of all the unemployed people that all you lefty liberals feel we should take care of. We'll end up with 50% income tax. The "wealthy" people that can still afford taxes will leave for more friendly waters. Costa Rica. Mexico. Islands out in the Caribbean.

All of this thanks to socialists like you who think that complicated, overbearing legislation run by bureaucracy will solve all our problems.

Re:Misleading summary

[Luscious868]

Enough with the "evil oil companies" bullshit. They don't make anywhere near the amount of money that oil producing nations themselves make when crude prices are high. Saudi Arabia will make $55 billion dollars more this year than they made last year due to the increased price of crude. 55 billion more than they made last year. That is about 27.5 billion dollars more a quarter than they made last year. Exxon-Mobile's profits this last quarter were only 3.8 billion. Not 3.8 billion more than the same quarter last year. 3.8 billion. That is a pittance compared to what Saudi Arabia and other oil producing nations (13 out of the top 15 being dictatorships) make. Oil companies do not set the price of oil. It's commodity and the market sets the price. There are supply and demand issues that are affecting the price of oil. There is a limited supply and ever increasing demand. China and India now use the same amount of oil that the USA used 10 years ago. The oil companies don't have any control over that. OPEC does. They could increase output if they wanted to. They don't want to. They market will bear these high prices, so there is no real incentive for them to do anything about it. Oil companies make an average of 9 cents a gallon on gasoline. 9 cents. I'm sure you don't believe that but the wonderful thing about our capitalist system is that these are publicly traded companies and with a little effort you can go look it up. The government, on the other hand, makes more than twice that in taxes. I don't here anyone talking about a windfall profits rebate from the government. Do you know how much more they are taking in gasoline taxes than they were a few years ago? You liberals don't bitch and moan about that. I don't hear people bitch and moan when countries like Venezuela and Bolivia nationalize their oil fields which results in reduced and inefficient production of oil which drives prices up. I hear them cheer it. I don't hear people bitch and moan when environmentalists prevent drilling in a small area of ANWR which limits our supply and drives prices up. I hear them cheer it. I don't here people bitch and moan when the government taxes ethanol imports to "protect" our farmers which drives gasoline prices up because the ethanol from corn that we can produce here costs more than the ethanol produced outside the country from sugar cane and other products in places like Brazil. I hear them cheer it. I don't here people bitch and moan when additional drilling isn't allowed to occur in the Gulf of Mexico which further limits our supply. I hear them cheer it. I don't hear people bitch and moan when drilling isn't allowed in the Great Lakes which again limits our supply. I hear them cheer it. I don't hear people bitch and moan when environmental regulations become so restrictive that oil companies are unable to open new refineries, which limits supply. I hear them cheer it. I don't hear people bitch and moan when individual states choose to dictate to the oil companies which mixtures of gasoline are allowed to be sold in the state which results in a more complex distribution network and drives prices up. I hear them cheer it. Yet you all scream bloody murder at the oil companies when all of the stupid decisions you make over the years finally come back to bite you in the ass in the form of increased oil and gasoline prices. You want to know who is responsible for the current supply crunch my friends? Look in the mirror. If we had made smarter decisions 10 years ago by allowing additional domestic drilling and allowing new gasoline refineries to open we wouldn't be in the position that we are in today. The fact of the matter is that we need today, and will continue to need for the next 10 to 20 years, ever increasing amounts of oil. Demand in China and India will only increase as well. If we do not increase supplies of oil domestically and increase refining capacity then we will continue to be bent over a barrel. By conservative estimates, we are at least 25 years away from transitioning to a primarily alternative energ

Re:Misleading summary

[Politburo]

iirc, one 'executive' has pled guilty, along with a few lower employees. However the big two are still on trial so the statement may technically be true, I think it's disingenuous to say that "The executives broke the law".

Re:Misleading summary

[tombeard]

Assuming your in the EU; Your not used to high gas prices, your used to high gas taxes.

Re:Misleading summary

[Anonymous Coward]

It's hard to say how big the benefits really are. How can we tell when its prevented another Enron?

Re:Misleading summary

[nelsonal]

The price and quantity demanded aren't related in the way you are thinking of them. In this case demand has grown (lets say 15% with GDP). Meaning that if gasoline prices were a buck and a half (oil prices of say $30/barrel), the US would demand 20% more oil products than we are currently--about 22 million barrels/day rather than 20.5mmbbls/day. However, due to supply restrictions ranging from outages in the gulf, shipping capacity, Venezuela, Nigeria, Equador, and the Middle East the world can only supply us with 20.5 mmbbls/day. So something has to choose which how to allocate the shortage. Our system uses an extreemly efficient method that cuts out all the dynamic multivariate calculus that would be required to balance everyone's need fairly by adjusting the price until the last barrel isn't used. This works very well at getting any resource into the hands at which it is most highly valued, by raising the price until the amount that can be supplied is the amount that is desired.
Of course this works well in the opposite as well, it encourages new supply to be brought to market, but it doesn't work out very fairly if the reason supply is tight is that the world is running out of a non-renewable resource (in which case huge returns are poured upon anyone who through smarts or luck stumbled upon the industry), but no amount of higher price can increase production. I'm not sure if that is happening, and sadly it will probably require much higher prices to ascertain if that is truly occuring or if this is just another temporary blip.

Re:Misleading summary

[greginnj]

If your 300-person company is spending 4 million per quarter on SOX alone, you are being vastly overcharged by both your external auditors and whoever is doing internal audit assist. I'm curious about what you count as 'accounting overhead' -- the budget of the entire finance/accounting departments?

Don't forget that external audit for publicly-held companies was a requirement before SOX was even thought of, and IT Audit (Section 404) is just one part of SOX.

As for "out of proportion for the damage small and midcap companies can do", the current debate about revising SOX has to be tempered by the proviso that most misstatements/fraud are detected exactly at those smaller companies. The goal is not to protect the US economy, but to protect the investor, including the small investor. If your 401K vanishes because of corporate malfeasance (intentional or accidental) it doesn't matter if it was invested in Enron or a small-cap.

I accept your statement that your company would be profitable were it not for SOX, but I seriously doubt that SOX alone is responsible for a $16 million swing per year.

Re:Misleading summary

[supersnail]

So far SOX has returned no visable benefits to society.

Sure there are more complex and harder to implement accounting regulations. Enron in theory had to complied with the GAAP rules
SOX is essentially GAAP++.

This is the basic flaw in regime. GAAP rules are meant to cover every
accounting eventuallity and over the years this has grown into a monumental
stack of rules and exceptions. This has on the whole led to worse accounting
as the more rules and regulations you have the more loopholes you have
and professionals in the accounting area are generally judged on there
abilty to exploit and manipulate these rules.

So given that the problem is a large and complex set of rules. The
US government imposes more rules as the solution.

This is a particular problem for non US comapnies which have a large
presence in the US as they are now forced to apply SOX to a set of figures
which is not based on GAAP rules.

If they really wanted prevent another Enron type fraud, the answer is
simple. Force companies to pay out at least 10% of there stated profits
as dividend to the shareholders. You need to have real cash in the bank
to do this and "on paper" profits dont hack it.

   

Re:Misleading summary

[Imsdal]

I don't agree. Even if the top two would be not guilty, executives at Enron *did* break the law. This trial is about who is responsible for that, not if it in fact happened. That is not disputed, not even by Skilling and Lay.

One may of course argue about the definition of "executives", but "employees at Enron broke the law" is 100% verified as tru.

Re:Misleading summary

[plague3106]

Maybe so, but on the whole, isn't it better to protect the investor and the marketplace from corporate criminals?

The marketplace and big investors ARE criminals.

Re:Misleading summary

[Lumpy]

Actually no they dont. they can continue to operate and not do SOX compliance.

It's just that the CEO and executives will be a whipping boys for everything that is wrong and get sodomized at avery turn by the FTC. Therefore SOX is a CYA for the CEO to avoid FTC performing a DRE. (DRE= Digital Rectal Examination)

Most companies needed SOX to get their act together the finance departments at most corperations are a land of voodoo and financial practices that are suspect at best.. If you our I did what corperations did with their finances we would be in jail. Problem is that the people that wrote it made the section on IT a 5 line paragraph that is so ambigous that you can interpet it in any way you want. So the executives go overboard and things spiral out of control. And that is where the costs get out of hand. a small company can not afford a secure offsite storage company for data as well as a secure IT department and IT professionals that are competent in not only security but what parts of the system are for financal data. In some interpetations SOX menas that your IT person in charge of the Finance data must be an employee!

Re:Misleading summary

[plague3106]

The fact that linear is or is not in the book doesn't matter. The point is valid; you don't argue complex economic systems from a beginners course. I think you may have missed the point.

Re:Misleading summary

[Anonymous Coward]

Easy, if making every company in the nation spend 10% of their income stops execs at one company from running off with $1.50, then that program is too expensive.

Re:Misleading summary

[Jtheletter]

Bravo, this is the only post I've seen thus far that cites specific examples of why people dislike SOX and how it is in fact creating uneccesary costs (in time, money, manpower, etc). Pointing out the double standard for management also elucidates the fact that the people SOX was meant to hold accountable - management who make the company-wide decisions - are not being made more responsible in some ways that perhaps they should be.

Re:Misleading summary

[Senjutsu]

Game theory is based upon zero-sum outcomes.

There goes any shred of credibility you've been clinging to. Zero-Sum games are but one branch of games studied by Game Theory.

Re:Misleading summary

[Imsdal]

The point is valid; you don't argue complex economic systems from a beginners course.

On the contrary, the point is that even a beginner's course can expose an argument as completely flawed. The opposite is not true, of course.

This all started with some poor clueless slashdotter arguing that supply and demand were bogus because we had seen a tripling of oil prices but not a tripling in demand. Surely even you can spot the fallacy in that argument?

Re:Misleading summary

[Anonymous Coward]

I whole heartedly agree. The goal of reducing fraud is good, but the implementation was awful. I spend an inordinate amount of time filling out paperwork, that in no way make my company for financially sound. All they need they need to keep is the criminal liabilities for the senior executives. ( and enforce them)

My 2 cents

Re:Misleading summary

[Anonymous Coward]

Well, if we could trust you do do your job ethically, we wouldn't have SOX, would we? And you cannot expect us to believe you anyway because you keep turning up the mantra "the corporation has to do everything to increase shareholder value". Nothing about ethics (see Google's recent deal with China for defenders of this idea).

So it is your own problem by not making ethical decisions the driving goal, only money.

Re:Misleading summary

[MrNougat]

Sarbanes-Oxley is a *very good thing* ...

And its implementation is horrible.

Section 404 gives a vague couple of lines about "information security," with nothing describing what qualifies as such. So, PCAOB is supposed to offer guidance as to what that means. PCAOB effectively said that the auditing companies are the ones who get to make the determination as to what qualifies as adequate information security.

Furthermore, the auditing companies can give you a lower score, or fail you, if you are deemed (again, by the auditing company) to be "argumentative" or "difficult." They can also charge you more money for the same reason.

That makes it so the auditing company can come in and make you dance through a million hoops, and if you dare point out to them that the hoops they're throwing up have nothing to do with information security, they can call you difficult, fail you and make you pay more.

Which means that the auditing companies get to call all the shots.

This all boils down to SOX being turned into a financial prop for the auditing companies after the fall of Arthur Andersen, with publicly traded companies paying the bill.

Yes, execs tell regulators that SOX costs exceed benefits. Normally, I don't agree with execs, but this time I do. Unless you understand the benefit to the auditing companies, in which case the execs are wrong.

Re:Misleading summary

[MadMagician]

The Sarbanes-Oxley Act of 2002 was written by Republicans. It mostly benefitted their biggest contributors, the financial industry.

And of course the government did not bring Enron down, it was Bush's biggest contributor early on, it bankrolled him.

Re:Misleading summary

[Hollyfeld]

Except that it will do nothing to prevent another Enron. No internal control can reliably prevent or detect fraud via collusion. SOX imposes ill-defined requirements for documentation of internal controls (basically a huge windfall for auditors, who get to "consult" and determine what thos requirements really are (lots of billable hours)) which should already be documented as part of a standard audit - nothing really new except more paperwork there. The other thing SOX does is make somebody sign eveything, thus theoretically establihing liability - the idea is that managers will pay more attention - the reality is that when I go to my boss and say "Sign this" it doesn't even get a look....

Re:Misleading summary

[Forseti]

That's bull. SOX doesn't require all that, someone at your company just went overboard. The only thing SOX reuqires is some sort of change management that's auditable. There's no reason why you'd need to fill out a bunch of forms, just a ticket that says roughly what you're going to do, why you're doing it and how you'll back it out if needed, and a manager's approuval for what you're doing. THAT'S IT! You should've been doing all of that anyway with proper project management.

Don't rail against SOX just 'cause your company implemented it wrong.

Re:Misleading summary

[Anonymous Coward]

Auditors hate it too.

Firstly there is a big problem trying to bill the company for all the extra auditing work that has to be done. The company is having to swallow a fee increase, and it'll make damn sure the increase is as small as possible. You do 50% more work for 25% more money: bad news.

Then the audit firm also has a huge amount of extra internal paperwork, which adds to the work required with no prospect of billing for it. I work in the UK, and if I do some work in the UK for a UK company with no US connections at all I still have to fill in a load of forms demonstrating the fact that SOX doesn't apply. Very few UK companies will pay you to demonstrate that US law doesn't apply to them, but we have to do it to keep the US regulators happy.

Re:Misleading summary

[paenguin]

The section 404 stuff is ridiculous. Why do we need individual audits of software pushes? I push a 1 line change, I need to fill out a SOX thing.

Because with a 1 line change in the code, you can steal a billion dollars? It's not a measure of how many lines of codes that got changed, it's a measure of accountability of who made the changes so that if the changes are later found to promote fraudulant use, the person or persons culpable are identifiable.

Re:Misleading summary

[metamatic]

Oil companies are refusing to do anything to lower pump prices because it's not in the best interest of the shareholders, despite it being in the best interest of society as a whole.

That's highly questionable. If, like several oil companies, you believe that we are hitting Peak Oil, it's definitely not in society's best interest to continue selling oil cheaply. Better to raise prices and start making people take efficiency measures.

Maybe that's bad for SUV drivers, but they don't care about anyone else so why should we care about them?

Re:Misleading summary

[multiOSfreak]

Smallcap businesses are hurt by it.

The SEC just announced that it plans to exempt micro-cap companies from Section 404 compliance. The proposal hasn't been approved yet, but it looks like it will go through. If it does go through, it would exampt about 70% of public companies from having to deal with 404. Article here.

Re:Misleading summary

[metamatic]

You are _not_ getting a honest accounting of a business. Only the appearance of one. [...] This legislation was ill concieved and simpleminded. Just the way the crafters wanted it [...]

Right. They don't want to prevent another ENRON; they just want to make sure that next time, they have a really plausible pile of paperwork to obfuscate things and make sure none of the good-old-boys gets punished.

Re:Misleading summary

[Maxo-Texas]

I do not totally disagree with you-- I have friends at other companies in the same town who do not have this heavy a load paperwork. However, it could also be that you work for a smaller company.

In any case- that is what our auditors required if they were going to sign off on our books- and there is -nothing- our executives could do to appeal that decision.

Apparently, SOX puts an enormous amount of power into the auditing firms hands .

Small company: a 20 hour project takes 20 hours.

Of course this is a huge corporation so...
Pre-sox: a 20 hour project took about 40 hours.
These days...
Post sox: a 20 hour project takes at least 160 hours.

No joke. Not exagerating in the least.

Re:Misleading summary

[tehcyder]

the company spends as much money on accounting as they do on software development

Could I please apply for a job as your CFO?

Re:Misleading summary

[tehcyder]

and they get paid literally millions of dollars

I think the Execs' argument is that they have to be financially compensated for not having interesting work like you oh-so-lucky programmers, nurses and, er, cleaners. Or something.

Re:Misleading summary

[Afrosheen]

If oil prices in the US were truly based on global demand, then we'd be suffering the same fate that Europe has for the last decade. We don't pay ~$6 per gallon like everyone in Europe does.

  Also Iraq oil production is a small fraction of global supply. Venezuela, Mexico, Africa, Saudi Arabia, Kuwait and other oil-rich countries give the world what they need, when internal conflicts aren't preventing the flow of black gold.

  Personally I only see one way out, and ironically, the companies that are currently shivving us are the companies that have the money to do it. Alternative fuels. Hydrogen, Ethanol, whatever the flavor of the day is, we need to switch to it en masse. Gasoline is just not economically feasible for the US anymore, particularly when, over the last 6 years, the economy here has been consumer-driven. The less consumers have to spend, the less money you have flowing overall. Not only that but inflation is becoming an issue with the Fed raising rates and salaries staying flat for the last decade. The price of bread, milk, etc. keep rising and salaries aren't keeping pace == inflation. /rant

Re:Misleading summary

[tehcyder]

Criminals do not obey the law

No they don't, and if they're caught they get punished for not doing so.

What are you saying, that it's pointless having any laws at all, because some criminals will break them?

Re:Misleading summary

[tehcyder]

Longest...paragraph...ever!

Re:Misleading summary

[Senzei]

It's no different then a hippie who places crystals on a computer to prevent it from crashing.

Yeah, except for most IT people it is a "more magic" switch, not a crystal.

Re:Misleading summary

[mOdQuArK!]

I think that the end of cheap oil is a godsend at this point.

It might be a godsend for the environment & society, but if you're so poor that you can't afford the transition to another style of living, it's going to feel like your world is caving in.

Re:Misleading summary

[SwissCheese]

We also don't pay ~$4 per gallon in taxes like everyone in Europe does.

Re:Misleading summary

[Tmack]

SOX has reduced my productivity by 75%.

Same here, except its not paper work issues. SOX itself is so vague on some of its requirements that companies tend to overreact in some situations. Take the stuff I write for example. I write and maintain operations software for the company I work for. SOX compliance come around, and instantly the software becomes a liability because it was developed in-house, neglecting the fact that authentication, logging, documentation, workflow and process requirements are already in place and probably SOX compliant or easily changed to be such. The higher-ups decide that most of what the software does should be in the company's central OSS system (the reason I wrote it in the first place was because our IS department refused to do so to begin with). To solve the problem, they decide to add a button in the OSS that simply makes a call to my software (still residing on my server). This, according to them, "wraps everything in controls and makes it SOX compliant." What a joke, it wastes my time because now I have to hold meetings with the IS group to explain how it works, what they need to do to make it run, make changes so their button will work, etc. when nothing changes other than where the request to the software initiated from. Other similar situations have cropped up as well, such as the attempt to "replace" all the systems I wrote with a framework to make it SOX compliant, and make it more managable and to avoid a "hit by a buss" scenario (perl vs the framework from a 3rd party vendor using a custom development platform based in java/jsp/xml/xslt and a few other languages/buzzwords all mangled together). And of course, this was all decided and set in motion without consulting me or anyone that actually works in or on the software. SOX is just another buzz word that gets execs excited and causes them to throw money at anything that promises to make it go away.

Tm

Re:Misleading summary

[Taevin]

Let me illustrate. When Clinton was president the US had a surplus. Over the next handful of years the govt not only squandered that surplus but got itself into massive debt. On top of all that there were terrorist attacks, two wars, and a long and painful occupation of a another country costing 300 billion dollars (which is surely under accounted).

Now you might think that something like would have had some effect on the economy. Maybe it would effect unemployment, maybe the stock market, maybe the strength of the dollar, maybe the interest rates, maybe the rate of savings, maybe consumer spending, maybe business spending. Some effect, any effect at all.

Nope. Nothing. Nada. Zilch. Zip. You can spend money like a drunken sailor, grow the size of the govt, wage war, squander your savings and dig yourself into debt, spend hundreds of billions of dollars one non productive warfare and there is no effect whatsoever.

Yes, well fortunately we don't (yet) live in a country where the government has absolute control over the economy. That is actually one of the benefits of having a free market: its efficient functions are not dependent on support from the government.

Of course, it's not a completely isolated system and there have indeed been changes in the economy that are likely a result of government activity, at least in part. Throughout the Bush administration I've heard people complain about unemployment and others about high interest rates. The value of the dollar actually is decreasing. As you may recall, after the September 11 attacks there was a lot of concern that people would not spend as much due to their concerns about their safety and the actions of their government.

In any case, those that believe strongly in the free market would tell you that government should have only indirect effects on economics - the effects that come about from forcing people to change their habits. This displays and important point: Economics is not junk science, it's a social science. Just like other important social sciences like history, psychology, education, communications, etc., economics is not bound by laws as in physical sciences where outside influences will affect the outcome. Instead they rely much more on correlations and trends in human behavior which is very hard, if not impossible, to predict. You set up a very bizarre strawman to attack economics through in the form of government stupidity. However, the fact is that government is only one peice of the human puzzle that forms our economic interactions.

Re:Misleading summary

[plague3106]

On the contrary, the point is that even a beginner's course can expose an argument as completely flawed. The opposite is not true, of course.

This is true when the beginner's text doesn't over simplify the subject which it is trying to explain. Economics books do this a great deal. As another poster put it, you're not going to argue with Hawking siting Newtonian physics.

This all started with some poor clueless slashdotter arguing that supply and demand were bogus because we had seen a tripling of oil prices but not a tripling in demand. Surely even you can spot the fallacy in that argument?

I agree that the argument there is in fallacy. However, two wrongs don't make a right so to speak, and a beginners text on economics doesn't really explain the economy that well at all.

All those economic forecasts are basically guessing, because in the end, they don't really know what people will do given a situtation. I have more faith in a weather forecaster than an 'analyst' or economics guru.

Re:Misleading summary

[AlexCompy]

"If oil prices in the US were truly based on global demand, then we'd be suffering the same fate that Europe has for the last decade. We don't pay ~$6 per gallon like everyone in Europe does."

I think you are confusing oil and gasoline. A European can buy a barrel of oil for pretty much the same price as an American (subject to minor shipping costs factored into the price). A European cannot buy a gallon of gasoline for the same price as an American because of localised factors, like sales taxes (much higher in Europe than the US) and labour costs at gas stations etc.

"Gasoline is just not economically feasible for the US anymore"

Yes it is. As you've already noticed, gasoline prices in the US are about half what they are in Europe despite people in the US being generally richer than people in Europe. Gasoline at its current price is economically feasible because people are still using it.

Maybe one day in the future gasoline will cease to be economic for consumers, but that day has not yet arrived.

Re:Misleading summary

[Afrosheen]

I fail to see how something is deemed 'economically feasible' just because people, when presented with no alternative, are forced to use a product whose price is spiralling out of control. It's very easy to sit in an air conditioned office, reading /. and making a 5 to 6 figure IT salary and state calmly that gasoline is economically feasible. However, anywhere in the midwest where people are surviving on McDonalds minimum wage (which is the majority if you judge Wal Mart's popularity), tripling their fuel costs puts a serious hurt on their welfare. The US is so spread out and dedicated to single-car travel we simply don't have bus or rail systems connecting everything. Therefore, our people are forced to buy gas and drive themselves.

  When energy costs reach the point where people are struggling to survive while paying their gas/electric/power bills, we've got a nationwide dilemma. Don't forget what Enron did to California by falsely manipulating the old supply and demand argument. Don't think for a second that Exxon and it's buddies aren't doing the same.

Re:Misleading summary

[Paul Carver]

No, he's saying that the Enron debacle was already illegal. The appropriate response of the government when a law is broken is to enforce the law. Passing a new law is a stupid response.

Of course, this would require that the executive branch do its job properly. The legislative branch should be solely concerned with ensuring that we have the absolute minimum laws possible to make all the "bad" stuff illegal while not making any "good" stuff illegal.

The executive branch should spend all its time making sure that it precisely follows the intent of the legislative branch. Of course that'll never happen.

Re:Misleading summary

[Anonymous Coward]

people ... presented with no alternative, are forced to use a product

That's bunk. First, on the poverty argument you make later, a lot of people were already too poor to afford to maintain a car. There are a bunch of them in my area, working as maids or dishwashers. They still get to work somehow. They live near their jobs or near public transit that can take them to their jobs and to the grocery store and so on. Nobody is forcing gasoline down their throats.

As for me, I've responded to rising gas prices by bicycling to work about 1/3 of the time. So the $3 gas is hitting my pocketbook as if it were $2 gas. Of course, this means I had to live closer to work, but I had already moved close in because I don't enjoy sitting in traffic for an hour twice a day (or spending the money on gas, even at $1 a gallon). It's also bad for my allergies, but generic allergy meds are cheaper than gas, and I'm considering buying a filter mask (since I'm old enough not to care if I look like a dork).

What rising gas prices do is reduce the range people can afford to drive each week. In the unlikely event that the current situation continues with no change in fuel efficiencies or gas prices, people will start moving back out of exurbia and into cities. Some small communities may succumb more rapidly to the pressures that were already killing them. Some people will go through some rough times. Some people will be stubborn for a while and go further into debt while trying to pretend the problem doesn't exist and maintain their previous lifestyle. But society isn't going to end because of high oil prices; it will adapt.

Re:Misleading summary

[tom's a-cold]

In the case of Enron, the corrupt behavior wasn't in the interests of their shareholders either. It was only in the interests of some (possibly most, but that's not clear yet) senior management. So in some cases there's an alignment of interest.

But yes, it should be possible to withdraw a corporation's charter if it does not operate in the public interest. Examples of "corporate death penalty" offenses should include collaboration with war criminals and human-rights abusers, high-level corruption, environmental destruction, and attempting in any way to influence the legislative process. "Free speech rights for corporations" are a fig leaf for the legislation-for-hire ordering process and should be stopped. Supporting criminal activity by the government such as warrantless eavesdropping would be another good category. Based on this, quite a lot of the oil companies, telcos and defense firms would be on the auction block for knockdown prices.

Would shareholders get burned by this? Goddamn right they would. And that's a prerequisite if they're ever to take responsibility for their firms behaving as part of civil society rather than as a protected form of criminal enterprise.

Re:Misleading summary

[whoppers]

IMHO, SOX doesn't matter. Where I work, we automatically adhere to SOX with good internal reporting procedures. I'm in Project Controls where I plan out the activities, costs and invoices for engineering & construction projects. I've never seen a company pay attention to the details as much as where I'm at now, but they've been in business for nearly a hundred years and they've been running successful projects this way for decades. Yes, we're employee owned.

If we pay this much attention to the financial details of a project, imagine the attention the project gets.

Re:Misleading summary

[jafac]

No-one wants more catastrophes like Enron, but that doesn't mean we should throw the baby out with the bathwater.

Fuck the baby.

There's plenty of people out there who want another Enron.

They just want it to be easier to not get caught. These individuals sponsor pro-deregulation articles at hack mills like Heritage Foundation and Cato Institute, and bribe their congressmen to give them tax cuts and contracts, and stronger IP law, and defanged regulatory oversight.

Republicans want deregulation, because it makes it easier to steal. Republican Culture of Corruption.

Re:Misleading summary

[crotherm]

Captialism is bad for society unless society is a subset of shareholders.


Capitalism is just a tool or method. It is neither evil or good. Much likfe a knife that can both kill you, and butter your bread.

Re:Misleading summary

[jafac]

Let me point out that it was the market that brought Enron down, not the government.

Let me point out that it was the GOVERNMENT that propped Enron up after the market took it down. Via bankruptcy protection.

If the government can grant bankruptcy protection, then the recipients of this LARGESS can damn well comply with some regulations on how they do business.

How about this?

Companies that don't like SOX, can opt not to follow it.
They can also opt-out of federal bankruptcy protection.
They can opt-out of being publicly traded.
They can opt-out of using public roads.
They can opt-out of hiring employees, each educated at public expense for 13 years.
They can opt-out of using the Internet.
They can opt-out of their Limited Liability Charters.
They can opt-out of selling their product to the lucrative American market without tarrifs.

Sounds like a deal?

Re:Misleading summary

[NavySpy]

This is where I get confused. Ken Lay and the boys were all criminally prosecuted for what they did to Enron. Why, then, do we need /more/ regulation to add more on top of what is already a crime?

I've never understood the notion that passing a law will stop people from doing something. I mean, existing law didn't stop Lay from doing what he did. Why would SOX stop the next guy?

Re:Misleading summary

[sjames]

It makes CEOs criminally liable for when their companies cook the books.

Cooking the books was already a crime. What it TRIES to do is make it harder to hide cooking the books and harder to disavow knowledge of it. In practice, it was never accounting practices that were the problem, it was crooked accounting firms that never seem to be investigated, the ability to call in favors to get the heat off, and the ability to shield personal assets if/when caught rather than handing them over to the stockholders for reparation. The truly repugnant part is that execs caught in the act spend a few years in a country club like 'prison' environment, then retire to their mansions where they are forced to choose between 3 Carribean vacations a year or just two and keep the limo driver (boo hoo hoo) while the defrauded retirees decide between food, medicine, or shelter.

It probably will reduce incidents of cooking the books by making it harder to get away with it, but the cost will probably be far higher than federal retirement fund insurance and removing financial protection for liabilities in connection with the commission of a felony would have been (That is, it is not cost effective).

Re:Misleading summary

[try_anything]

Yes, they do, and more efficiently than regulated ones. If regulation solved problems, there would be no pollution, no corruption, no scandals.

Markets only operate efficiently with regards to costs that are visible in the market. Many incredibly harmful things may or may not show up as costs in an unregulated market, depending on the circumstances. Theft, fraud, murder, dumping toxic waste, and slavery can all be profitable in a completely unregulated market. Private property itself is a regulation that is enforced in society by government intervention.

No pollution? Pollution doesn't cost anything in a "free" market, so a free market is completely blind to it. Regulation intervenes in the market to attach costs to pollution so the market can efficiently manage it.

Re:Misleading summary

[bolerobell]

I wasn't totally clear in my meaning with my post. I don't mean that the substantive law of SOX is what totally stops crime. It is more a public perception issue. SOX closed a perceived hole. Of course, requiring company officers to sign off on accounting statements is a Good Thing.

Concerning your "do you even know what enron did wrong" accusation: Enron got into trouble when they were certified to use the Mark-To-Market Accounting method (rather than Cash or Accural Accounting methods). Now, Mark-To-Market is fine for selling fungible goods (which Enron originally did. They started as a natural gas clearinghouse), but eventually Enron was using it when selling services or non-fungible goods and that just doesn't work right. It opened a hole whereby they could record revenue on their financial statement for the present when they wouldn't necessarily be earning that revenue for years. It was all based on projections. The problem occured when Enron started projecting higher revenues for its projects (like the Indian Power Plant) that never met those numbers. After a while of this, they had a ton of unreached revenue numbers (which became debt) that they hid by having Fastow sell off the debt to other companies that he created for that express purpose.

Enron is bad because Skilling and later Lay claimed to never know what Fastow was doing with the debt. Of course they knew, but there was no proof that they knew. One of the provisions of SOX is that the CEO and other responsible officers (as well as some boardmembers, I believe) now ABSOLUTELY have to sign off on the financial statements. If such a signature existed for Enron, there would be no long drawn out trial for Skilling and Lay because the case would have been a slam dunk (as it is, their defense is "Fastow did all that, we didn't know!")

So, yeah, I know what Enron did wrong, and I know how SOX seeks to fix that and other problems brought up by Worldcom and Tyco not to mention that absolute corruption of Arthur Andersen and the accounting practices that were allowed.

Re:Misleading summary

[killjoe]

You are saying the same thing I am but in a different way. I am saying that economics is junk science because it has no cause and effect. You are also saying that but in a very round about way.

The govt is the largest employer in the economy, it's also the largest lender, the largest spender, and the most powerful force as it can interest rates, money flows, etc. You simply dismiss it as completely inconsequential. There is nothing that the govt can do that can effect the economy. What an odd thing to say.

Saying that economics is social science and that it's "very hard, if not impossible to predict" is the exact same thing as saying it's a "less predictable subset of psychology".

My point stands. If an economist tells me that X will lead to Y it's exactly the same thing as a hippie telling me that crytals prevent computer crashes. Neither one has a clue, both of them are telling me how they think the world ought to work, and neither one can point any scientifically rigorous study that backs them up.

Where I come from that's called junk science.

Re:Misleading summary

[Anonymous Coward]

No, it's killing a butterfly with a cannon. Because one company was run by a bunch of crooks, every other public company has to vastly increase their costs, which is money that isn't spent of improving their products, hiring more workers, or cutting prices to their customers.

It was way more than one company. After the stink of Enron, Arthur Andersen, Worldcom, Tyco, et cetera, et cetera, the SEC gave companies a chance to "restate" their balance sheets. Literally thousands of restatements issued forth from the largest public companies.

Re:Misleading summary

[d34thm0nk3y]

"Completely free markets don't work."

Yes, they do, and more efficiently than regulated ones. If regulation solved problems, there would be no pollution...

Are you insane??? What possible reason would polluting businesses have to install expensive scrubbers or stop dumping pollutants in the rivers instead of having them disposed of properly??? That shit is expensive, and with ZERO return on investment they would be insane to undertake that voluntarily.

Re:Misleading summary

[Anonymous Coward]

It's pretty clear that Bob was saying that half-assed pop-science analogies based on game theory--of the sort that shilly made--are based on zero-sum asumptions. You're just being an ass because you're unwilling to see the truth of what he's saying. Open your mind; you'll be a better person for it.

Re:Misleading summary

[sumdumass]

Conservation is a ploy by the oil companies to spend less money in development, refining capacity and harmfull emissions reduction. It allowes them to pocket the funds that would be needed to be spent on this wich would lead into alternative fuels to be given to investors.

The oil companies are the real benefiters of conservation, plain and simple. and everytime someone get a sustainable alternative fuel source ready for public use, they will lower prices to make the cost of the alternatives seem too high.

Re:Misleading summary

[Anonymous Coward]

Because one company was run by a bunch of crooks, every other public company has to vastly increase their costs, which is money that isn't spent of improving their products, hiring more workers, or cutting prices to their customers.

Just as, because one set of assholes used airliners as weapons, every other airline and other business has to act like they're all over the place and the American people have been conned into giving up virtually all their remaining freedoms.

Does anyone with greater than a single-digit IQ really believe the shit coming out of the White House about how "no personal information is being captured" when the numbers of tens of millions are being stored? If my number is 999-555-1234 and I call OBL at his hideout in Afghanistan, you can damned well bet it'll get "personal" in a big hurry.

In case y'all didn't get the news, many years back, Reagan visited San Francisco. One upstanding Republican young lady wanted to press the flesh of her Beloved Leader.

Since all the public transit had been rerouted by a few blocks, she called the hotel where he was staying to ask where the closest bus would be stopping. She was given a non-answer.

Within a half hour, her doorbell rang and she was confronted by two MIB, who required a detailed explanation as to why she had made her inquiry. They addressd her by her first name, which she had not given in the phone conversation.

You can be certain that today, they'd have arrived with her electronically-transmitted dossier in hand, listing her mother's maiden name, her blood type and the full names and addresses of her most recent nine sexual partners.

Re:Misleading summary

[Anonymous Coward]

In case you were not driving then, gas stations ran out of gas all over the US. It was awful, especially if you needed to get somewhere.

Well, if that ain't the fucking "DUH" of the week, there ain't one.

Re:Misleading summary

[ncstockguy]

"Foxes tell Farmer Fence Around Chicken House is too High"
That would be a better headline.
These laws are all written by special interests anyway because congress and staff are too dumb to do it. Guess what we get?
Sarbanes-Oxley was one of the few laws in recent years actually written by objective parties. Naturally the business community wants to blow it away.

Re:Misleading summary

[NateTech]

The point is, it was never INTENDED to have any return other than compliance with the law. Studying the costs of legal compliance vs their monetary gain is tilting after windmills.

Re:Misleading summary

[Bob_Robertson]

"Pollution doesn't cost anything in a "free" market"

Then you neither understand the word "cost" nor "free market".

Pollution is externalized cost. By violating the private property rights of your neighbors, the people down wind or down stream, you can "dump" your wastes on them to clean up instead of you.

Since it is a "free" market, there is no EPA to tell me that I cannot sue you if you pollute below their guidelines, there is no justice department to enforce a statute of limitations, there is no "pollution credit" you can wave in my face to allow you to get away with polluting.

If you are at all interested, try this: http://www.mises.org/story/2120

If you bother to read that, then come back and tell me what part you disagree with.

Bob-

Re:Misleading summary

[Bob_Robertson]

"Are you insane???"

No.

"What possible reason would polluting businesses have to install expensive scrubbers or stop dumping pollutants in the rivers instead of having them disposed of properly???"

Because otherwise they get sued out of existence, boycotted, have their foibles plastered all over the "ecologist" web sites, newspapers and broadcast media.

Or do you believe that an issue so important to you is of little or no importance to anyone else?

If you really feel that some vast majority of people are going to sit back and let pollution happen, then a representative government also has no power to do anything about it.

Reality is that people do care. Businesses care about how they are perceived, especially in relatively unregulated sectors (remember the free market?) where competition is far more about keeping customers than simply minimizing costs.

The greatest pollution has always been in the more socialist countries, or where governments enforce "commons" that no one owns, such as waterways, than then get horribly polluted because there is no private owner looking out for their property values.

Again I suggest http://www.mises.org/story/2120 if you are actually interested in doing more than insulting people you happen to disagree with.

Bob-

Re:Misleading summary

[try_anything]

Sorry, when I see the term "free market," I don't automatically research what it means to the person using it. Rest assured that if all self-identified believers in the free market were put on a planet together and asked to implement it, there would be a bloodbath.

I can't imagine why you chose to link the paper you did. It systematically explains why every imaginable effective way of limiting pollution is illegitimate under a libertarian system. The solutions proposed require so much time, money, and attention by so many individual litigants that they would simply never happen, and the paper endorses principles that severely limit legal simplifications such as joining defendants and plaintiffs. Because of this, the system described by the paper is a utopia for polluters in which the unlikelihood of effective litigation grants economic legitimacy to pollution. The main promise is not clean air but the freedom to pollute, and if you don't see it that way, then I believe you're misreading the intent of the paper. (That the authors identify pollution as a Bad Thing -- aggression and injury, in their terminology -- means nothing. It is merely de rigueur.)

Re:Misleading summary

[Bloke down the pub]

The biggest fallacy is that if you can't predict everything perfectly, you can't predict anything approximately.

As to beginners' texts not explaining things, I just pulled an intoductory economics book aimed at business students from the shelf. Elasticity is covered in the third chapter of nineteen. Perhaps Afrosheen hasn't studied it to even that level, but it's probably better to be silent and thought a fool than to speak out and prove it.

Re:Misleading summary

[jcr]

The point of SOX is to prevent a repeat performance by a company using the same not-quite-illegal/barely-illegal tactics that Enron used.

Nope, that's just the rhetoric that Sarbanes used to sell it to the public. The real point of it is to make business that much more difficult for smaller companies.

-jcr

Re:Misleading summary

[Bastard of Subhumani]

Except that oil prices are based on global demand, not U.S. demand

Global? That's to do with the so-called "rest of the world", isn't it?

I suspect that if the person you're attempting to educate is as good at geography as he is at economics then he:

    a) never heard of it
    b) doesn't believe in it
    c) thinks it's flat.

Re:Misleading summary

[LifesABeach]

Sounds to me like some ass licking is going on. As for honesty, it's never cheap, but for the victums, the price is within bounds.

Re:Misleading summary

[Stoolio]

"Or at least check to see if the company is a publicly held company before applying. SOX SUCKS"

You got that right!

Mom and Pop Shops = I love my job!

Publicly Held Companies = How much longer until I go home?

Re:Misleading summary

[will_die]

Europe prices for gas are not based on any additional costs for fuel but because of all the extra taxes they have to pay.
BBC had an report, earlier this year or last, that showed that without taxes, gas prices in most of the UK would be right around or in some places even cheaper then the US average.

Too bad for them.

[Spazntwich]

But laws like this wouldn't really be necessary if businesses had followed the laws in the first place, huh?

Too bad it only takes a few bad apples to ruin it for everyone.

Re:Too bad for them.

[aztec rain god]

But do you really expect the bad companies to follow the laws anyway? Isn't this a case of laws being written to keep good companies from doing bad things? Seems like the only law that really applies in the end is caveat emptor.

Re:Too bad for them.

[drsquare]

You might have a point if only the small minority of companies which broke the law were punished by this legislation, however even the innocent companies are being hammered.

Sarbanes-Oxley is like shooting a machine gun into a crowd because one person there robbed a bank. But then any shit gets modded up on this site.

Re:Too bad for them.

[Anonymous Coward]

you've defeated your own argument. there already were laws on the books to prevent this. passing new laws when you already have laws that would work if enforced correctly is a bad solution.

In other news...

[Aquitaine]

High-level Corporate Executives agreed at a recent meeting with Other High-Level Corporate Executives that recent cookie-control legislation was inhibiting their ability to take cookies directly from the jar without telling anyone.

Of course they're going to say that...

[Manchot]

They're the executives of the companies. The act was designed to protect against their misdeeds. Moreover, the benefits can't exactly be measured in terms of dollars, because a large part of the act is preventive. That is, you can't measure what never occurred, especially when there is little statistical data from which to back up an analysis.

The Heavy Hand of Sarbanes-Oxley

[Anonymous Coward]

SOX is a very heavy burden on small businesses that are public. The real winners under SOX are the auditing firms.

Re:The Heavy Hand of Sarbanes-Oxley

[greginnj]

SOX is a very heavy burden on small businesses that are public.

Note the emphasis. Most posts are just saying 'companies'. Kudos to you for saying _public_. If you want to get the windfall of an IPO, if you want to have stock in your company traded on an American exchange, you submit to the relevant regulations. It's not like there haven't been any cases of unchecked corporate malfeasance screwing over the small investor, have there? So, the costs are passed on through stock dividends (or less directly, through share prices, which are essentially expectations of dividends), and SOX serves as a form of insurance against fraud for the small investor.

Re:The Heavy Hand of Sarbanes-Oxley

[novus ordo]

"small businesses that are public"

Look! An Oxymoron!

Re:The Heavy Hand of Sarbanes-Oxley

[44BSD]

The issue is that the cost of that "insurance" is too high.

SOX auditors have picked waaaaaay too many nits. Partially this is because of ambiguous (or non-existent) guidance from the PCAOB. Partially it is execs being IT ignoramuses who believe Big 4 FUD. Partially it is seasoned IT folks and internal audit departments lacking a common language, not trusting each other, etc.

Re:The Heavy Hand of Sarbanes-Oxley

[buck_wild]

Maybe I just don't get it, but why would that be an oxymoron?

My neighbor, for example, has a small, public business with 3 full-time employees. He runs a print shop.

Re:The Heavy Hand of Sarbanes-Oxley

[TuballoyThunder]

I guess you have never heard of a small-cap business. According to investopedia

The big-cap stocks get most of Wall Street's attention because that is where the lucrative investment banking business is. These, however, represent a very small minority of publicly traded stocks. The majority of stocks are found in the smaller classifications, and this is where the values are. To prove this we examined Baseline's database of 10,721 stocks and found that 88% of the stocks were in the smaller classifications.

The breakout by category (same source)

Mega Cap: 10 0.1% (over $200 billion)
Big Cap: 374 3.5%
Mid Cap: 794 7.4%
Small Cap: 1888 17.6%
Micro Cap: 2015 18.8%
Nano Cap: 1699 15.8%

Big Cap - Market cap of $10 billion and greater
Mid Cap - $2 billion to $10 billion
Small Cap - $300 million to $2 billion
Micro Cap - $50 million to $300 million
Nano Cap - Under $50 million

Re:The Heavy Hand of Sarbanes-Oxley

[JKConsult]

As one of the people upthread who didn't specifically mention the word "public" (though I was specifically talking about 10-Ks), I presumed that someone who chose to read this thread would be aware of this distinction.

(or less directly, through share prices, which are essentially expectations of dividends)

For non-growth oriented companies, this is typically true. It is certainly not true of growth-oriented companies. There are obviously many, many investors putting their money into growth-oriented companies, and they really don't give a rat's ass about dividends, except as they pertain to a later willing buyer's concept of the value of the stock. Would the world be better if the people in the market were actually concerned with dividends (and therefore, concerned with things like future cash flows and liabilities)? Probably, as this would tend to highlight stronger companies with the consistent revenue streams and forecasting abilities to consistently return high dividends. On the other hand, it would also make it harder to get those start-ups out of the gate, because with the difficulty of predicting dividends for them and few people investing purely for the potential of the stock price increasing, there wouldn't be a whole ton of money flowing their way.

Re:The Heavy Hand of Sarbanes-Oxley

[LordLucless]

His print shop is publically-traded? I work with a graphic designer specializing in print work, so I have contact with quite a few print shops. Some are sole traders (non-corporations) and some are incorporated, but none that I know of (apart from the large chains like Kiwk Kopy) are publically traded.

Re:The Heavy Hand of Sarbanes-Oxley

[buck_wild]

To be honest, I'm not sure whether it's traded publicly or privately.

You mean, "... thus far"

[BadAnalogyGuy]

What is completely overlooked is that in the long run, such a system may have unintended/unforeseen benefits that make the current costs worthwhile. In addition, the hardening of accounting systems is amazingly beneficial for avoiding fraud and other "disappearing funds" problems that plague the previous system.

What we don't need is engineering sites spewing this kind of crap. Lots of engineers make a lot of money implementing these systems, and the more support for it we can muster from the engineering press, the more iPods and Ferraris we can keep ourselves in.

S-Ox is great. Keep up the good work.

Re:You mean, "... thus far"

[mparker762]

What is completely overlooked is that in the long run, such a system may have unintended/unforseen costs that make mockery of the current benefits. In addition, the hardening of the regulatory systems is amazingly costly for stifling innovation and other "inventions we can sell" features that helped create the boom economy of the previous system.

What we don't need is engineering sites spewing this kind of crap. Lots of engineers have lost their jobs due to the implementation of these systems, and the more criticism we can muster from the engineering press, the more iPods and Ferraris we can keep ourselves in.

S-Ox is disastrous. Please stop spewing this crap now.

Not surprising.

[JKConsult]

First, of course companies are saying this. Sarbanes-Oxley requires them to do things that they don't want to do, namely properly assess their controls and have the CEO and CFO officially sign off on financial reporting.


But the real issue is that proper external financial reports aren't for the business (though they do help it, as long as the business pays attention to what they say.) They're for external users. And I can tell you right now that while banks who are looking to loan money, analysts who are grading performance, and investors who are looking to invest in a company's stock or bonds wouldn't mind seeing any costs cut, they don't think that the benefits are outweighed by the costs. They'll take the best information they can get, no matter what has to be done (within some modicum of reason.) And that's the point of Sarbanes-Oxley.

In 2004, GE spent about $33 million on Section 404 compliance, and costs ran about the same in 2005, Ameen said.
According to a quick perusal of GE's 2004 10-K, they had $20 billion in pre-tax income. I don't think $33 million is remotely too much to insure that that 10-K is correct.

Re:Not surprising.

[Jeff DeMaagd]

In 2004, GE spent about $33 million on Section 404 compliance, and costs ran about the same in 2005, Ameen said.
According to a quick perusal of GE's 2004 10-K, they had $20 billion in pre-tax income. I don't think $33 million is remotely too much to insure that that 10-K is correct.

That turns out to be 0.16% of the total income. Not bad, though expenses generally tend to add up, I don't know what compliance to other regulations cost. I imagine GE can forgo a the operation of couple of their executive jets.

Re:Not surprising.

[JKConsult]

Not bad, though expenses generally tend to add up, I don't know what compliance to other regulations cost.

Expenses do add up, but this is one of the most necessary expenses around. If you can't trust the 10-K, what the hell good is it?

Compliance (to accounting standards) generally involves a bit of staffing and their accoutrements (PC, office space, etc.), but it isn't typically more than that. Sarbanes-Oxley is more expensive than most to comply with, because it involves fairly detailed examinations of internal practices. However, in the general sense, these are very good things for a business. I haven't read Sarbanes-Oxley with a magnifying glass, so I can't state with 100% certainty that it doesn't require anything overly burdensome. However, I would be very wary of any company that is so averse to turning their eye inwards that they actually publicly complain about it.

Oh no!

[TadZimas]

The thing designed to make it harder for companies to make money illicitly is preventing the corporations from making money?
Sweet merciful crap, that's obviously a poorly designed bill.

we need more

[r00t]

Execs ought to be criminally liable for all the illegal decisions they make, and for failure to report illegal actions.

Just imagine if the Microsoft anti-trust trial put all the execs in jail or worse. Actually, the mere threat of this would have prevented the problems in the first place.

SOX == Selling Tool

[carpeweb]

One reason why costs might be higher than benefits is that system integrators jumped on SOX (like white on rice) as a pure sales tool. Sales training at all the big firms and even regional players pumped SOX as a great issue, and they caught executives feeling exposed and therefore willing to pay all kinds of money just to feel covered.

I think the mentality created was something like "well, no one ever got fired for protecting the company from SOX", and it didn't matter what it cost. A lot of the people selling "solutions" to this problem had no idea even what it meant, just that executives were scared of SOX.

Fear is a great motivator.

needs change

[Anonymous Coward]

The accounting laws needed to be tightened up, but SOX was definitely overkill.

What happened in the 1990's was some new loopholes opened up and reforms were needed. However, the big 5 auditors along with a lot of corporations and and investment banks used their political muscle to stop any new laws (see the book Against the Street, by Arthur Levitt, who was head of the SEC at the time).

Then we started having all those accounting scandals, but Bush was president and he had appointed accounting industry lapdog Harvey Pitt as SEC chairman, and insisted it was not due to structural problems, but only a few "bad applies" (like Ken Lay, Bush's long time friend and political supporter).

But then came the WorldCom collapse and Bush was forced to suddenly reverse direction and support the legistation that was in the hopper at the time, Sarbannes-Oxley, which was unfortunately too extreme. If Bush had been working for reform all along, something sensible could have been passed, but instead we got a bill that imposes greatly unjust burdens on industry.

Well, we have seen it in operation for a few years, so maybe now it will get adjusted.

UNIX Audit Tools

[__aahsof7392]

I have quite a bit of experience with Sarbanes-Oxley and UNIX compliance. One weak area is auditing root and shared account access. Generally the developers know the application account's password (like oracle or db2) and it's really hard to audit who did what. I created the tool Enterprise Audit Shell (EAS) which centrally logs shell access and sessions in an enterprise environment. Sessions can be snooped in real-time or played back at a later time. Each session is digitally signed and transmitted via OpenSSL. Project Site http://sourceforge.net/projects/eash Support Forum http://eas.strchr.net/

Re:UNIX Audit Tools

[alxtoth]

This is the first time I see something practical in relation to S-OX. Usually it's just powerpoint slides presented by managers who got them from other managers ... who got them from some company trying to sell S-OX consultancy.

Re:UNIX Audit Tools

[Cally]

sudo is your friend. Developers should not know (have no need to know) application or database passwords. Arguably the Right Thing is pass-through auth anyway, whereby (eg) database acccess by middleware triggered by interaction with a web UI passes through the end-user's credentials. I hate to say it but this particular aspect of (modern) Windows auth actually works fairly well in my experience. You can hack stuff up to do the same thing under Unix if you're prepared to take the risk of using PAM and the pain of integrating those pieces, but it's a real pain.

Re:UNIX Audit Tools

[tehcyder]

I'm none the wiser after reading through loads of posts on this subject, so: I see the point of the increased SOX financial accounting/audit regulations, but how does this relate to keeping a paper trail of user logins or software code changes (as in an earlier post)?

What financial fraud does the latter prevent?

CEOs hate rules against stealing. Whodda thunk it.

[leftie]

CEOs are whining about laws that prevent them from looting millions. Couldn't have see that one coming, huh?

In other breaking news...

Murderers say the costs of laws preventing murder exceed the benefits.

Executive Pay

[Anonymous Coward]

Yep, this is just like executive pay: executives agree that executive pay is too low. Since executives are on the boards of directors that define the pay of other executive, the are always giving each other raises. It's a fair and ballanced system with full transparency that responds to the will of the market and results in an efficient distribution of resources. Please stay quiet while we steal what's left of your paycheck, retirement and healthcare. The system works!

Very unpopular sentiment

[Bob_Robertson]

Government regulation always increases costs, because the regulation has costs of compliance.

Crooks don't comply, because they're crooks.

Customers, that's us, end up with higher prices for the things we buy, and higher taxes to pay for all the new auditors.

Martha Stewart goes to jail while the real criminals get away with what they've always gotten away with.

Politicians get reelected for having "done something".

To quote from the movie Spartacus, "I'll take a little republican [style of government, not party] corruption, along with republican freedom!"

Want to really put the screws to "corporate executive" crime? Then eliminate the government granted limited liability that a "corporation" represents. Allow thereby the officers of a company to be directly liable for their decisions, their accounting practices, their performance.

It's easy to follow the Big Lies handed down by the sensationalist press that don't want you looking at their own corporations and unions. S-O doesn't solve anything. It merely adds another layer of bureaucracy to the effort of getting anything accomplished.

Bob-

Re:Very unpopular sentiment

[BadAnalogyGuy]

Want to really put the screws to "corporate executive" crime? Then eliminate the government granted limited liability that a "corporation" represents. Allow thereby the officers of a company to be directly liable for their decisions, their accounting practices, their performance.

So mom & pop running their little grocery on the corner should be forced into poverty because Wal-mart moved in next door and took all their customers away?

Great idea!

Re:Very unpopular sentiment

[Brushfireb]

The corporate limited liability is the only thing that has prevented our society from spiraling into a litigous mass of nothingness. At least, until we change our tort laws so that the maximum payout is the maximum input.

So if you get sick from a hamburger, fine, you get your money back, but thats all, not 40 million dollars. Otherwise, corporate limited liability MUST stay.

I'm ok with responsibility and fairness, provided it goes BOTH ways. Otherwise, we might as well just shutdown any reasonably sized business, becuase they will just be sued into oblivion without limited liability.

Re:Very unpopular sentiment

[bolerobell]

Quick note. Limited Liability afforded by corporate status doesn't protect the officers, it protects the owners (shareholders) from liability.

However, I don't necessarily think that eliminating the corporate form is bad. I think it runs counter to a true free market (because corporations by design work to restrict real information about the marketplace). Combined together, I think that the Corporate Form and the increasingly unregulated markets (notice I didn't say "Free") that we have will eventually end with a severely weakened governmental system and a rise of corporate systems to fill the power gap. Then we will have a new beginning of Fedualism.

Re:Very unpopular sentiment

[greginnj]

Want to really put the screws to "corporate executive" crime? Then eliminate the government granted limited liability that a "corporation" represents. Allow thereby the officers of a company to be directly liable for their decisions, their accounting practices, their performance.

Geez, bud, put down the Ludwig von Mises website for a minute, and do some research for a minute, to wit: http://www.s-ox.com/Feature/detail.cfm?articleID=1 743

"Sarbanes-Oxley attempts to achieve this goal by legislating: [...] Personal responsibility on the part of top executives and board members regarding the accuracy of financial statements their companies release..."

You sound like a bitter socialist (and I'm a leftie myself) who's so anti-est that nothing it does can be appreciated. Maybe SOX isn't everything, but it's certainly a step in the right direction, including the direction of requiring personal responsibility you evidently didn't know it had.

Re:Very unpopular sentiment

[Bob_Robertson]

Ok, thank you. With that in mind I think it still counts, because if the shareholders knew they were also liable for their share of the companies actions, there would be far more accountability simply because "shareholders" would demand it.

The supposed goal of Sarbox (great name) would be achieved by market forces.

I also expect that, since where there is hazard there is profit, insurance companies would come up with a way to create "shareholder insurance". Interesting thought that.

Bob-

Re:Very unpopular sentiment

[Bob_Robertson]

"You sound like a bitter socialist (and I'm a leftie myself) who's so anti-est that nothing it does can be appreciated."

No, I'm a bitter anarchist who watches as everything government touches turns to poop, which poop is then used by government to justify more intervention, which then turns to poop, which poop is then used...... etc etc etc.

If you try something and it doesn't work, stop trying it. Everybody recognizes the simple logic of not hitting ones self in the head a second time, but somehow government is immune to this logic.

Failed programs get more money, more staff, more power and more regulations to wield. A "successful" government program is the one that wastes the most money doing the greatest amount of damage! Farm subsidies that destroy the "family" farm are a perfect example, since those very subsidies were justified by saying they would save the "family" farms.

The politicians that deliver the greatest subsidies get reelected regardless of the destruction wrought. "Unintended Consequences" is a great book with a prophetic title.

Yes, I'm bitter and disgusted. If you're not, you don't have your eyes open.

Bob-

Re:Very unpopular sentiment

[cpt kangarooski]

At least, until we change our tort laws so that the maximum payout is the maximum input.

So if you get sick from a hamburger, fine, you get your money back, but thats all, not 40 million dollars. Otherwise, corporate limited liability MUST stay.

That is the stupidest, most unjust thing I've seen today.

The idea of tort law is to make the victims of a tort whole, and to discourage tortfeasors and other potential tortfeasors from harming anyone else similarly.

If you get sick from a hamburger, then yes, I suppose you'd have a warranty claim for the burger having been defective, in which case the appropriate remedy would be the price of the burger.

But that's totally beside the point that the burger made you sick, causing you to rack up medical bills, lose income because you can't work, caused you pain and suffering, etc. To even suggest that the price of the burger would be just compensation for what could be quite significant injuries, is simply cruel of you.

In any event, limited liability merely refers to the liability of investors (who cannot lose more money than they invested -- i.e. if you buy $50 of stock in WidgetCo, and they go out of business, you only lose that $50) and that's it. The corporation itself is not shielded from liability, nor should it be. And its officers and management, in their capacities as such, are not particularly shielded either, though their concerns are less about tort liability and more about liability to the investors, to whom they owe a duty.

Re:Very unpopular sentiment

[The New Stan Price]

YES. Why do you feel that people should be entitled to keep a business open that offers higher prices and possibly lower quality? Wal-Mart is in the commodities business, which deals with quantity over quality and low margins for the most part. If Mom and Pop want to survive, they should think about getting into the specialty business, which deals with quality and uniqueness over quantity.

They should probably not put all there eggs in a coffee shop though, as Starbucks might move in and take over! Geesh.

Re:Very unpopular sentiment

[simishag]

Want to really put the screws to "corporate executive" crime? Then eliminate the government granted limited liability that a "corporation" represents. Allow thereby the officers of a company to be directly liable for their decisions, their accounting practices, their performance.

The "limited liability" you speak of applies to shareholders, not officers. The distinction is an important one, as they are not always the same people. If I buy 100 shares of Microsoft, my liability is limited to my investment. A plaintiff cannot sue me as a shareholder. I do not think the stock market would do too well if any shareholder of any company could be sued due to actions taken by the company.

Corporate officers do not have "limited" liability in this sense. They have been prosecuted, with varying degrees of success, for crimes committed on behalf of their employer. They can be sued, although most large companies provide legal representation and indemnification to their officers for actions taken in the corporate name. As an example, if a company fails to remit payroll taxes withheld for employees, the IRS can go after the corporate officers personally to attempt to collect the taxes. The IRS cannot, however, go after shareholders.

Re:Very unpopular sentiment

[Bob_Robertson]

Thank you, indeed it has already been pointed out. And I'm glad to know that the limited liability was not what I thought it was, although now I'm going to have to find out exactly what it is that is "limited" in a "limited liability partnership" since I've seen lots of them recently. Maybe, "My partner did that, you cannot sue me"?

I'm also curious about the elimination of the limit to liability of investors. Regardless of endangering the business model called "stock exchange", what if investors had to actually be careful about what they were buying into? That doesn't sound like such a bad idea.

Also, I could see such a "stock exchange" idea coming out of shares in a literal "stock", investing in a product or venture rather than in the business itself. Then, if that product or venture failed it would have the same effect as the present limit of liability, because it wasn't actually shares of the "company". Hmmm, maybe that's why it's called shares of "stock" in the first place.

Thanks for showing where I was wrong. That means I'm learning something and I like learning. Let's just hope that the next person who wants to point out the error reads your posting.

Bob-

Re:Very unpopular sentiment

[simishag]

Thank you, indeed it has already been pointed out. And I'm glad to know that the limited liability was not what I thought it was, although now I'm going to have to find out exactly what it is that is "limited" in a "limited liability partnership" since I've seen lots of them recently. Maybe, "My partner did that, you cannot sue me"?

http://en.wikipedia.org/wiki/Partnership should answer your questions.

I'm also curious about the elimination of the limit to liability of investors. Regardless of endangering the business model called "stock exchange", what if investors had to actually be careful about what they were buying into? That doesn't sound like such a bad idea.

Well, I'd first argue that they already have to be careful, since if they're not they can still lose whatever they invested. Also, requiring investors to assume liability simply discourages investment. Who'd want that kind of risk for the relatively small returns of the overall stock market? The only industry that comes to mind is nuclear power, where power plant operators in the US are required to assume unlimited liability in case of an accident. That may be sound policy, but it obviously scares investors.

Re:Very unpopular sentiment

[Beryllium Sphere(tm)]

>Crooks don't comply, because they're crooks.

Unless they're required to sign their names to their crimes, prevented from pleading ignorance, and faced with real penalties. Then crooks will comply unless they're psychopaths.

Re:Very unpopular sentiment

[Bob_Robertson]

Thank you for the pointer. Hopefully it will be of help, I expect so. I just don't recall seeing so many "L.L.P." suffixes 30 years ago. Something seems to have changed.

I expect that "go to Wikipedia, newbie" will become as commonplace as "use Google, newbie" is in the technical fields now, and "RTFM" has been in the past.

Re:Very unpopular sentiment

[hpcanswers]

Want to really put the screws to "corporate executive" crime? Then eliminate the government granted limited liability that a "corporation" represents. Allow thereby the officers of a company to be directly liable for their decisions, their accounting practices, their performance.

SOX already holds CEOs and CFOs personably liable for accounting statements. I whole-heartyly endorse such practice. I am, however, doubtful that increasing compliance costs will be better for investors who, you know, generally like to see their companies make more money.

Re:Very unpopular sentiment

[ArsenneLupin]

Why do you feel that people should be entitled to keep a business open that offers higher prices and possibly lower quality?

Nobody's speaking about being entitled to keep an unprofitable business going. But people should have some protection against a business failure wiping out all their personal life savings. Yes, these failed grocers should get another job, but they should be able to do so with a "clean slate".

Re:Very unpopular sentiment

[TrappedByMyself]

It's easy to follow the Big Lies handed down by the sensationalist press

How is that any worse than following sensationalist whiners on the internet?

Ooooh.. government is evil! ... ooohhhh rich people!! ooooooo corporations!!11!!!! oooooohhhhhh

Re:Very unpopular sentiment

[ari_j]

Shareholder insurance already exists. It's called limited liability. If you make people pay an additional premium to invest safely, they won't invest in businesses anymore. If you make them liable for director and office liability (side note: there is insurance for directors and officers for this; it's similar in form to malpractice insurance), they will invest elsewhere.

Shareholders are already discouraged from investing in companies that break the law. When a company breaks the law, its profits go down and thus its stock prices go down, making the net worth of its shareholders go down. You don't want to discourage them from investing at all, though.

Business tends to stagnate without investment, and making shareholders liable for corporate wrongs will increase the cost of entering the market with a new company to the point that nobody will do it.

Re:Very unpopular sentiment

[ari_j]

Additionally, lawyers tend to be made personally liable under SOX for helping directors/officers do bad things and even for not reporting directors'/officers' bad behavior. SOX is one of the exceptions to attorney-client privilege, and it's a mandatory exception (even the exception for telling the police that your client is about to kill someone is less rigid).

Re:Very unpopular sentiment

[Blakey Rat]

To also quote the movie Sparticus: "I am Sparticus!"

Re:Very unpopular sentiment

[The New Stan Price]

I must have misunderstood your comment.

Mom and Pop businesses are often private businesses, where Mom and Pop are the owners. Public companies are different beasts, where a small group of partial owners run the company for a much larger group of owners. The protection needs to be biased towards the larger group of owners. How that should be done is up for debate.

Re:Very unpopular sentiment

[Brushfireb]

No, I think you and I are in agreement.

The reason for my comment concerning hamburgers was intended to be an example why limited liability is important, not a justification for only providing people the cost of the hamburger. The cost of damages is always much higher from negligence, but the investors should not be liable for everyday human error -- hence why limited liability is a good thing.

My part was not to argue that we should remove either, just to point out how bad it would be to create actual liability for investors in the situation of a "bad hamburger".

B

Re:Very unpopular sentiment

[bolerobell]

Acutally, it would shift investing from people investing directly in a company, to investing with mutual funds or just depositing their money in banks. Investment won't dry up, it will just move and place new buffers between people and their investments. Mutual funds will adopt the risk and will exercise more control over their investments and possibly bring about a better style of corporate governance where "profit at all expense" will be replaced with "profit, but do it right".

People invested in business before the corporate form existed, and they will continue to invest in business if it disappears. Partnerships of varying types existed and even limited liability partnerships would work as well. I just think it is bad policy to remove shareholders so far from corporate governance that the ethics of governance are ignored in favor of extreme profit.

Re:Very unpopular sentiment

[Anonymous Coward]

Then the mom & pop grocery should do what Meijer has done to compete against Mal-Wart, focus on customer service and product quality to satisfy the customer, as well as keeping the prices as low as possible.

'Please don't regulate me'

[maynard]

"That's the general consensus of a wide range of business executives and auditors who gathered Wednesday in Washington, D.C., for an all-day roundtable hosted by the U.S. Securities and Exchange Commission and the Public Company Accounting Oversight Board (PCAOB)."

Uhhh, so who is networkworld.com, why should I believe what the regulated have to say to the regulators, and why did the article summary assert what they stated to congress as certain truth?

SOX as Damage

[bill_mcgonigle]

I appears Corporate America is viewing SOX as damage and attempting to route around it. The Charlie Rose Show had on a couple of the biggest private equity fund managers the other night and they were talking about companies which are moving headquarters and operations off-shore because of SOX. They hate it.

However well-intentioned SOX is/was, if this trend continues, we don't get the SOX purported benefits, and we lose the economic benefits of these companies on US soil.

Re:SOX as Damage

[Shelled]

Doesn't work if their stock trades on an American exchange. I work in Canada for a Canadian company and we're obliged to adhere to SOx because our stock trades on Wall Street. Thank you Enron, for making your dishonesty international.

Re:SOX as Damage

[greginnj]

Don't ruin Canada's great reputation with your whining. SOX only affects activity within US borders. If the owners (shareholders) of your employer don't like complying with American securities laws, why did the board vote to trade on an American exchange? Vancouver and Toronto have exchanges, don't they? And they're so much better regulated and more secure than the American exchanges, why wouldn't you want to trade there?

Re:SOX as Damage

[dr_dank]

However well-intentioned SOX is/was, if this trend continues, we don't get the SOX purported benefits, and we lose the economic benefits of these companies on US soil.

Working in an accounting environment, I see firsthand the enormous amount spent on Sox compliance. The OP's example only proves my assertion that the slimes that run the game will find new and novel ways to get their hands in the till.

The Ken Lays of the world didn't get the big bucks from playing by the rules.

Re:SOX as Damage

[inode_buddha]

"The Ken Lays of the world didn't get the big bucks from playing by the rules."

Quite true. But they did get almost universal disrespect and revulsion in exchange for those dollars. Was is worth it, and will they ever be able to use and enjoy those dollars as a part of normal society again?
Was the trade-off worth it?

Re:SOX as Damage

[Brandybuck]

Don't thank Enron, thank the US Congress for punishing you for what Enron did.

Re:SOX as Damage

[Duncan3]

And more importantly, why the heck would ANYONE want to have their stock trading in US Dollars these days?

Re:SOX as Damage

[TobascoKid]

The Ken Lays of the world didn't get the big bucks from playing by the rules.

There was a TV programme on a while back that pitted self made millionaires versus ordinary office staff in various challenges (to see what the pychological differences were) - the biggest difference was the amount of stretching, bending and breaking of the rules done by the millionaires (they would cheat at the first opprotunity). So it does seem that in order to be really successful you have to not play by the rules.

Re:SOX as Damage

[Politburo]

Thank you Enron, for making your dishonesty international

Don't like it? Trade in Toronto. Next please!

Re:SOX as Damage

[Shajenko42]

Quite true. But they did get almost universal disrespect and revulsion in exchange for those dollars.

Only the ones who got caught and punished.

The rest are still living the good life and getting plenty of respect, because people respect success, however it is obtained.

Re:SOX as Damage

[inode_buddha]

"...because people respect success, however it is obtained."

Not necessarily. Personally, I'm much more comfortable with an honest failure than a crooked success.

Re:SOX as Damage

[Shajenko42]

You're in the minority.

Re:SOX as Damage

[jpostel]

Allow me to introduce you to Michael Milken, 1980s Junk Bond King.

http://en.wikipedia.org/wiki/Michael_Milken

Was charged with "98 counts of racketeering and fraud", but only served 22 months of a 10 year sentence. Paid $900 million in fines, but still had $1 billion when he got out of prison. He has spent a ton of money to buy back his "good name" and even made it to the cover of Fortune magazine in 2004 for his donations to medical research.

The real question is whether he is actually sorry for what he did, and is trying to pay back his debt to society, or if he just wants people to like him so much that he is willing to spend his money on what he thinks will improve his image.

Re:SOX as Damage

[inode_buddha]

Yes, ISTR that one, as well as Wall Street".

A good question, IMHO, but one cannot "buy" a good name except perhaps *only* in financial/legal circles. IMHO, the real question in your 2nd paragraph is one of ethics in general (vis-a-vis the ethos of a narrow segment of society).

So, the question(s) that I am seeing in your second paragraph are this:

Many people will spend whatever it takes to be liked (or at least perceived to be liked), even for ulterior motives. The question of joy vs. sorrow and debt to society can go all the way down to the individual level: What is the individual ethic vs. the society's ethic, even if constrained to financial markets? IMHO, a society is composed of like-minded individuals within any given generation and nationality, but it is the collective aggregate of the individual's behavior that will form the society. And with a large enough pertubation that behavior might well turn out to be something that nobody likes. BTW, nice tagline re: Jon Postel

Re:SOX as Damage

[mattwarden]

However well-intentioned SOX is/was, if this trend continues, we don't get the SOX purported benefits, and we lose the economic benefits of these companies on US soil.

Really, though, who could have forseen that increasing the cost of doing business would push companies to find a cheaper location to run their business?

I think you are confused.

[Belial6]

I think you have gotten the words "Everybody" and "Somebody" confused.

Follow the money

[3ryon]

From my experience at having to deal with IT compliance with SOX for two different companies, I have to say that the only people made better off by SOX are the auditors and consultants....it's a shame they didn't have to pay for this law like normal corporations.

Too bad for them-Apple core.

[Anonymous Coward]

"But laws like this wouldn't really be necessary if [individuals] had followed the laws in the first place, huh? Too bad it only takes a few bad apples to ruin it for everyone."

That reminds me. Anyone have the BT for the latest movie?

Costs to who?

[plopez]

Sooo... tally up the cost of the Enron scandel:
1) The company went under, costing investors billions.
2) Some of the investors were people working for retirement, count up the cost of medicare and other public support they will need.
3) The manipulation of the elect. market caused a number of bad side effects including lower competitiveness of businesses in the affected areas (e.g. California).
4) Some business, I have no doubt, went out of business due to increased costs. Good ideas may have been lost, peoples lives and dreams shattered.
5) Senior who had to decide between drugs and utilites, some decided on utilities perhaps causing premature death.
6) Davis was unjustly (ok, he wasn't perfect but who is?) run out of office and instead you have a 'wanna be' called 'Ahnold'. They manipulated the politcal process.

SOX should be a reminder that large corps. can have huge impacts. And so the execs should be aware and bound to use their power in a moral and ethical manner. And since they cannot police themselves, external controls are needed. SOX isn't perfect, but we need to understand that we need to protect our people and economy.

If I had my way Lay et. al. would be on trial for terrorism and manslaughter for the people who died and the damage to the US economy.

(I will now step down off of my soap box...)

It also costs *us*

[Space cowboy]

Because now, if there are *any* new features in an update to a program, the company who created it *must* charge for that upgrade. This totally changes how software is developed and marketed...

Previously, if I had a program I wanted to release for profit, I would do the core features well, and add modules on around the side later, at extra cost. I might release interim patches for any bugs found in the field, and as a sweetener, upgrade some small functionality to get users affected by the bug back on "my side".

Now, I can't do that. The only time I can have a free interim release is to fix bugs - no new features are allowed. I'm no lawyer, but this is (expensive) legal opinion. So the dynamic changes - in order for me to have the most flexible release policy, I'm *far* better off releasing bug-ridden software that does *everything* - even if it only does it badly. Following this path, I get a choice of how to proceed later (I can add functionality *by* fixing "bugs" (ahem) by actually making a serious attempt to provide the functionality I promised in the first place). I can gauge the market and give it away free if that suits my needs at the time.

Now there's a downside to releasing bug-ridden software (and we're all aware of the arguments). The problem with this (responsible) attitude is that the collective consciousness of consumers today seems to not have a problem with buggy software - software crashes all the time, they're used to it, and it's a self-propogating meme of "what is normal". Responsibility don't pay.

So, when I release software (under the usual constraints of "good,cheap,fast - pick any two") I'm being pushed in the direction of "cheap and fast" because there's no real downside to me, and I get a lot more flexibility with dealing with the resulting debacle. I can balance my budget better ("cheap") and I get to market faster ("fast"). The fact that it doesn't work so well isn't really an issue.

That's what Sarbanes-Oxley has done for us.

For the record, I don't release software - please direct hate-mail to /dev/null. But if I were a software company, I sure-as-hell would be looking for an upside in the SO legislation, and I don't see any other "good" routes...

Simon

Bring back Glass-Steagall

[Raul654]

I'm 100% in favor of bringing back the Glass-Steagall Act, a useful bit of post-Depression legislation that would probably have prevented Enron (or, at the very least, significantly reduced the overall damage). Glass-Steagall ruled that a company could not do both finincial analysis and investment banking, because it's a conflict of interest to be evalauting the same companies you have intestments in. Thanks to the Republicans, Glass-Steagall was repealed in 1999 (although, to be fair, Bill Clinton did sign the law repealing it).

Re:Bring back Glass-Steagall

[Fulcrum of Evil]

Thanks to the Republicans, Glass-Steagall was repealed in 1999 (although, to be fair, Bill Clinton did sign the law repealing it).

If the republicans controlled both houses and passed it with a greater than 2/3rds majority, what's the point in vetoing it?

Re:Bring back Glass-Steagall

[Megane]

If it passed with greater than 2/3rds majority, then a lot of Democrats must have voted for it, too.

Re:Bring back Glass-Steagall

[nycguy]

With regard to repealing Glass-Steagall, the ability to provide integrated financial services including commercial banking, investment banking, and trading is important to the growth and competitiveness of the financial services industry. Why should one have to do banking at one institution, insurance at another, and brokerage at yet another? While there is more robustness in diversity of providers, there are also efficiencies of scale in having a range of services provided by the same institution, particularly when it comes to comprehensive planning.

As far as conflicts of interest go, they exist in any industry. The solution is not laws attempting to prevent conflicts of interest--the solution is vigilant monitoring and harsh punishment for those who fail to live up to their fiduciary responsibilities. Strong civil penalties also help. However, hamstringing an entire industry because someone might do something irresponsible is not the way to go.

Re:Bring back Glass-Steagall

[Anonymous Coward]

Pfft, horseshit!

It is important to neither growth nor competitiveness, simply because it applies equally to all actors. And *even if it did*, what's the value of growth in one economic sector against the growth of the *rest of the economy* - since everybody else depends on them?

Now there are indeed economies of scale in having a single stop for banking, insurance and brokerage, some of which are of course passed on to customers.

The math here is simple. Is the cost for customers of Glass-Steagall greater or lower than an Enron every so often or Sarbanes-Oxley? The article seems to point to "lower".

Worthy of notes is that SarbOx was drafted by - surprise, surprise - the financial actors who of course didn't want any of the burden on themselves, and instead advocated compliance procedures that they could charge for auditing! Talk about the culprit dictating the sentence! It's totally unsurprising that the rest of the economy, which is feeling the pain, is a bit miffed about it.

No one wants another Enron, BUT...

[geoffrobinson]

you have to take into account unintended consequences.

And another Enron may not be as bad as the cost on the economy. Maybe not. But maybe so.

I've also heard people argue that rogues will be rogues no matter what law you implement. This just punishes corporations which are already ethical.

In other words, we have to think it through.

Re:No one wants another Enron, BUT...

[Anonymous Coward]

Then don't be a public company!
There is nothing requiring small private companies to implement this.

My company is private and shall remain so.

Re:No one wants another Enron, BUT...

[burtman007]

And with out public market capitalization, you will most likely remain small...

Just like mine safety.

[DAldredge]

Just like mine safety.

Mining accident kills people.
Law makers pass laws to improve safety.
Time goes by.
Mining companies, on the basis of a much improved death rate, get rules changed/relaxed.
Repeat

The Biggest Problem With SOX

[MCTFB]

is in spite of the complaining by companies in the Fortune 500, the relative costs of SOX are low for mega-corporations like General Electric compared to a medium-sized business looking to try and compete with the big guys. Just as many well-intentioned business regulations are designed to keep the biggest and the baddest companies from screwing the public, the biggest unintended consequence of most business regulations is that these same regulations stifle up and coming competition whose resources might be scarce and the difference between spending 33 million dollars on SOX compliance is the difference between being a viable competitor in some market and being bankrupt.

Of course SOX doesn't affect small businesses, but if you ever want to become grow and become a big business, then you are taking an extra risk once you reach the threshold of employees that forces you to effectively making paper log files of every single form of correspondence in the company. For the Fortune 500 guys, not having to worry about competition from new competition is a big win for them, and for any aspiring entrepreneur a big loss that makes you wonder if you would be better off expatriating to another country and starting your business offshore where the success or failure of your business is not tied exclusively to how efficient you are at dealing with government regulations.

Let shareholders judge the value

[bagsc]

GE's Section 404 controls cost: $33 million
GE's Market Cap: $365 billion
Percentage of Capital spent to make sure they're honest: .09%

As a GE stockholder, I'm happy with that. I will always be willing to pay .1% to ensure I don't lose 100%.

Re:Let shareholders judge the value

[bagsc]

Make that .009%...

Re:Let shareholders judge the value

[MCTFB]

Is GE the only company out there who has to comply with SOX? What about the companies spending up to 10% of their revenue for 404 compliance. Just as Wal-Mart can have economies of scale when doing retail operations, any megacorp has an economy of scale in complying with SOX. Excessive government regulation has a crippling effect on small businesses and medium-sized businesses that you never hear about from the sensationalist news outlets out there. These companies and their owners are invisible as far as the masses are concerned.

All the masses care about is that guys like Kenneth Lay get stuck in a "Federal Pound You In The Ass Prison", while a lot of other companies are forced to waste scarce resources they could be using to hire more employees or else be forced into the dire choice of offshoring or inevitable bankruptcy.

It is ironic that a lot of Slashdotters seem to complain about being the victims of offshoring, but at the same time they defend laws which help to eliminate their jobs at the same time.

Re:Let shareholders judge the value

[the_humeister]

GE is not Enron. Wal-mart is not Enron. Perhaps the closest would be Worldcom or Duke energy.

Re:Let shareholders judge the value

[tehcyder]

up to 10% of their revenue

No, no, you're doing it wrong!

The preferred method of making up statistics is to provide a more (but not *too*) exact looking and less rounded figure e.g. 12.3% or perhaps 9.85%.

The "up to" is a good trick though, after all 0.000006% is included in the range of "up to 10%".

Re:Let shareholders judge the value

[bagsc]

Yes, but only GE's costs are listed in TFA :)

(If I thought it were Enron, I wouldn't be a shareholder.)

404

[tehwebguy]

The SEC and PCAOB arranged the roundtable to solicit feedback about Section 404 of the legislation, which Could Not Be Found...

Re:404

[RobertLTux]

slashdot mini poll
if you see the number 404 you automatically think #item not found
10%
20%
30%
50%
70%
100%
Commander Taco%
of the time

Whose?

[inode_buddha]

Whose benefits and whose costs are being exceeded here? And by what measure? Whose measure?

IMHO it's a pretty sad day when a bare minimum of societal/public ethics needs to be legislated.

Duh, I could have told them that.

[Banner]

I've worked with sarbanes-oxley, it's a joke, and sadly the joke is on us. It really doesn't do anything good, it's just a knee jerk beauracratic response to increase the number of beauracrates.

Re:Duh, I could have told them that.

[JKConsult]

How did this get modded insightful? (I know, I know, don't bitch about moderation.)

There's no analysis here. Would you care to tell us why you think this? Sarbanes-Oxley, as discussed all over this thread, provides a number of very real and tangible benefits. I'm certainly willing to listen to an argument that the downside outweighs those benefits (especially from someone who "works with it"), but that's nowhere to be seen here. The article only mentions the costs associated with it, and in my post upthread (and in the first response to it), we see that the costs are $33 million per year for GE (the example in the article) out of $20 billion in pre-tax income. If you think that's too much, or if you've got another reason why it's a net bad thing, let's hear it.

Re:Duh, I could have told them that.

[Anonymous Coward]

You couldn't be more right. I have worked on both sides of SOX (accounting firm and public company) and the joke is three-fold:

1. While SOX was created with the guise of preventing another Enron, the reality with Enron is that there was corruption and falsification of records, not only at the highest level of management, but also with the auditing firms. Sarbanes-Oxley, and 404 specifically, does nothing to prevent another company from "Enronning" if there is this level of malfeasance.

2. The auditors who audit general (i.e. non-IT) internal controls are quite competent (that is really what they are schooled on; internal controls are what auditors were to test and rely upon so that they didn't have to do so much damn substantive testing.). However, CPAs were supposed to be doing this testing all along. 404 simply gave CPA firms license to charge for this testing, which should have been occurring already. I think this is what bothers me most about 404.

3. (rant) The auditors who are auditing IT-based controls, on the other hand, generally are all-theory types (no offense to anyboty who is really theoretical, just don't pretend that theory and reality are always the same) who understand theory very well, but have no clue when it comes to real-world. They have a firm grasp on policies and procedures, but either don't know how to do risk-analysis or don't think it is worth their time. Some controls simply aren't worth putting in place (or are worth putting in place but not worth testing regularly), because 1) the related systems are not that critical (or they have NO bearing on financials -- which is what these auditors are supposed to be assessing), 2) the theory behind the designed controls don't take into account all of the facts (password policies have been re-hashed how many times here?,and for the record I think you have to account for corporate culture, system criticality, and any number of other variables in designing a proper password policy), 3) there are other controls that completely mitigate the risk addressed by said control, and 4) sometimes the greatest risks aren't mitigated by the specific controls the auditors want to see and the risks that are mitigated are extremely negligible. I have seen accounting firm auditors focus on IT controls mitigating risks that simply do not exist in certain businesses while ignoring blatantly obvious risks, even in instances where controls existed to mitigate those risks, but the auditors just didn't bother to test them. (/rant)

Now, I would have to say that in middle to large public companies, 404 simply formalized processes that should have already existed and forced companies to document things better without causing much harm. This formalization is a good thing in general and probably has prevented some wrongdoing at the lower-to-middle management level. But my opinion remains that 404 really hurts smaller public companies, increasing costs by orders of magnitude; at the same time it does nothing about reducing any of the meaningful risks that caused Enron to implode as it did.

Flame on.

Re:CEOs hate rules against stealing. Whodda thunk

[kfg]

Murderers say the costs of laws preventing murder exceed the benefits.

First off, there are no laws to prevent murder. There are laws to prosecute murder. There's a difference.

Secondly, the costs of laws to prosecute murder are often murderous, which is exactly why we let them plead to manslaughter.

KFG

boondoggle

[eronysis]

I believe SOx was indeed well intended, however if you have ever dealt with these auditors you would quickly realize that in practice SOx ended up as a boondoggle to a few very large accounting firms. I have actually dealt with "auditors" who requested(upon me asking about where he was based and that I speak the language) I speak in spanish, as they were based in mexico city on contract...He then asked for a screenshot of /etc/passwd, not the file itself mind you a screenshot of a pwd at the path! Not that the file would do much good as my boxes are all trusted . Idiots driving idiots

Re:boondoggle

[Anonymous Coward]

as an auditor who performs this type of work (admitedly, not the most exciting part of my job), the guy was actually trying to achieve a certain objective. By looking at the file permissions, you could test who has sufficient write privileges to modify the file.

He *should have also got a dump of the contents, but then again, there's some crap auditors out there, as are some crap sys admins - i can verify this when we do patch management work and most organisations are pitfully inadequate, despite the well publiscised warnings.

ok - off to tick some stuff with a green pen now.

Exec Talk Is Cheap

[Doc Ruby]

The benefits those executives are counting don't include the cost of, say, Enron. Count a few dozen $BILLION collapses against the costs, and S-O looks pretty cheap. Not as cheap as ethics would make business, but there's no known way to inject that into capitalists.

Re:Exec Talk Is Cheap

[robertchin]

But then in that case, really SOX compliance should be paid out of public tax dollars, perhaps capital gains tax, since it's something to protect the shareholders. Otherwise businesses will pass their costs on to their customers, when really maybe it should be the shareholders that should be paying.

Re:Exec Talk Is Cheap

[Doc Ruby]

Why should the public pay to protect the shareholders? That's exactly backwards. The shareholders should pay for their own protection. Public tax dollars pass the costs onto their customers, their shareholders, and everyone else, regardless of the degree of benefit gained from the protection. Meanwhile, the capital gains tax is being repealed, not earmarked for sustainable development. The really appropriate funding puts SOX costs on the corporation, like any other accounting, and would increase the capital gains tax to account for the increased government oversight costs.

Mod up.

[Duhavid]

Someone seems to disagree with this sentiment.

Mod Parent Up!

[Bob_Robertson]

Very well said. I'm sure the buggy-whip and wooden-wheel manufacturers put out of business by these new-fangled automobiles are not enjoying your posting much.

Or the Hand Loom manufacturers! Entire industries put out of business by the WalMarts of their day.

Re:Mod Parent Up!

[BadAnalogyGuy]

That's not what my post was about. It was about forcing mom & pop to declare bankruptcy because they can't pay their S-corp's debts to its suppliers. Mom & pop are going out of business anyway. Are you really going to take everything they have because they are the owners of a failed business?

Wow.

Re:Mod Parent Up!

[Bob_Robertson]

"That's not what my post was about."

Well, good sir, I think you need to go back and change your wording. The other person and I both received the same impression by your post, that the Mom and Pop were going out of business because WalMart moved in next door and undercut their prices.

I have gone back and read it and it seems you used very clear and unambiguous language to mean something other than what you say now you meant to say.

Bob-

Hmmmm......

[g1zmo]

I didn't realize it was a profit-boosting initiative.

Please....would someone in Washington think of the corporations' bottom line for once??!!!

Sounds like the Ken Lays in IT are unhappy

[Anonymous Coward]

That's a good thing.

As usual, it's the "experts" who make the money.

[SeaDuck79]

I've had to follow after some of these consultants, since I work in a related industry. I've seen companies so scared to do anything that they're in process paralysis, because some SOX consultant was paid $250/hr to tell them they were going to jail in a handbasket if they didn't lock down everything that moved. Some listen when I tell them that all they have to have is good logging and a multiple-entity approval/decision tree, but some are just to shell-shocked. Unchecked Corporate greed has always been around, and does need to be regulated, but SOX is just another another example of something that government made worse.

Just for comparison

[BadAnalogyGuy]

Here's what I originally wrote:

So mom & pop running their little grocery on the corner should be forced into poverty because Wal-mart moved in next door and took all their customers away?

Here's what you took out of this:

the Mom and Pop were going out of business because WalMart moved in next door and undercut their prices.

Now let's look at my original post with some helpful reading comprehension assistance added:

So mom & pop running their little grocery on the corner should be forced into poverty because Wal-mart moved in next door and took all their customers away?

Notice that the base assumption was that Wal-mart would force the closing of the small business? That is a given. The main difference between saying something as straightforward and obvious as that and what I said was that anyone with any idea about corporations would have automatically picked up on the bolded statement whereas the average dumbfuck would have had a kneejerk "fr33 m4rk37 15 t3h r0x0r!" reaction.

I just saw your other post which admits ignorance about corporations, so I'm pretty sure which type of person I'm replying to.

Re:Just for comparison

[Bob_Robertson]

"I just saw your other post which admits ignorance about corporations, so I'm pretty sure which type of person I'm replying to."

And you're wrong. I suggest that your "anyone with any idea" is the assumption that needs to be addressed.

Your posting was not addressed only to learned economists and business majors. If you meant "forced into poverty by resulting lawsuits" instead of "forced into poverty by a lack of sales", it is my opinion that you should have said so explicitly.

Indeed I am a free-market advocate, because in every instance of abuse I notice the hand of government behind it. Even Microsoft has finally (after being sued for non-existant "monopoly" abuses) figured out how to play the game and are pushing DRM and "Trusted Computing" legislation to crush F/OSS and make them profitable by law.

While I agree with your edited comment, your original had a different meaning, which, please don't be surprised, I also agree with.

Commodities don't make money except in volume. Mom and Pops don't deal in volume, so they have to come up with a different format or they don't survive. That's normal, it's all just business. That's what insurance is for. I also oppose legislation that takes the place of insurance, which seems to be what you say you were originally trying to say.

But then it is past 1am, so good night.

Bob-

Re:Just for comparison

[Anonymous Coward]

THIS IS NOT ABOUT GOING OUT OF BUSINESS. YOUR ATTEMPTS TO DERAIL VALID CONVERSATION TO SUIT YOUR LIBERTARIAN/ANARCHIST AGENDA ARE UNWANTED HERE.

Important Stuff

        * Please try to keep posts on topic.
        * Try to reply to other people's comments instead of starting new threads.
        * Read other people's messages before posting your own to avoid simply duplicating what has already been said.
        * Use a clear subject that describes what your message is about.
        * Offtopic, Inflammatory, Inappropriate, Illegal, or Offensive comments might be moderated. (You can read everything, even moderated posts, by adjusting your threshold on the User Preferences Page)

Problems regarding accounts or comment posting should be sent to CowboyNeal.

Re:Just for comparison

[Bob_Robertson]

Anon screams, "THIS IS NOT ABOUT GOING OUT OF BUSINESS."

Unfortunately, that is an obvious reasoning of the posting which brought up the subject you are complaining about:

"So mom & pop running their little grocery on the corner should be forced into poverty because Wal-mart moved in next door and took all their customers away?"

"[F]orced into poverty" by lawsuits, as opposed to "[F]orced into poverty" because of a lack of sales was not specified.

Scream all you want, the fact remains that Sarbanes-Oxley is a government regulation that has a compliance burden that some companies cannot pay. That means going out of business or going private. So it is indeed about "going out of business" and you can stop screaming.

Bob-

Re:Just for comparison

[BadAnalogyGuy]

Wow, are you still here?

As I said before, it would have been obvious to anyone with a clue about corporations (and I erroneously assumed that since you were arguing against them that you were one of those people) that my post was about small time owners being hurt by the elimination of the LLC.

And, incidentally, I am not simply talking about lawsuits that bring poverty upon the owners of the failed business but also (and more commonly) the debts incurred by the business. If you were to eliminate the LLC, you would make the owners liable for all debts of the company. Now maybe you would like that, but I've seen your posts and it sounds more like you've found some extreme-libertarian dogma to follow rather than having actually thought anything through. It's not even worth arguing about this. Your initial suggestion to eliminate corporations is so off the wall that I should have seen it for what it was.

Good night, and sleep tight, Bob. There's a whole world of government intrusion waiting to get its hands on your life tomorrow!

Re:Just for comparison

[Bob_Robertson]

"Wow, are you still here?"

Indeed, personal reasons, more fun to post than sleep, that sort of thing.

"it would have been obvious to anyone with a clue about corporations ... that my post was about small time owners being hurt by the elimination of the LLC."

I see this as the detail which would have been best included in the original post, instead of explicitly associating your Mom&Pop being impoverished by "WalMart" moving in next door.

True, it is more related to the subject, but the inclusion of WalMart moving in next door rather distracted from you stated goal.

"If you were to eliminate the LLC, you would make the owners liable for all debts of the company."

Not if the legislation were replaced by explicit contracts and insurance. One wonders how people got along before the LLC legislation. Or didn't you know that this is a relatively new invention?

Could it be that this is related to the "shares of stock" idea? Could it be that shareholders, rather than holding shares of ownership in a company, would own shares of the actual stock thereby insulating Mom and Pop from the debts incurred and so creating the "limited liability" that you favor?

No really, let me flesh this out. Rather than go into debt _at_all_, Mom and Pop use the money from sale of "shares of the stock offered for sale" to avoid being in debt at all. If the stock doesn't sell, let's say because WalMart moves in next door, or sells at a loss, the "share holders" lose some or all of their investment and Mom and Pop lose only what money they themselves put into that unsold stock.

Profits from sale of that stock are shared among the shareholders, so an investment pays off because it was a good investment. Mom and Pop are, of course, major share holders of that stock.

That makes a lot more sense than selling shares in the actual company, and then depending on government legislated limits on liability for insulation against creditors.

Now, tell me again about my "dogma" and "off the wall" ideas. Really. I'm interested in how you think I've been inconsistent.

Bob-

Re:Just for comparison

[BadAnalogyGuy]

Of course you would know that most corporations are privately held small businesses and not publicly traded companies. So I won't bother to bore you with that information. /sarcasm

I don't think you are inconsistent at all. I think you have been consistently wrong, except for the places where you agree with me.

You are uninformed about the role that an LLC plays.
You are uninformed about corporations in general.
You misread my original post as to mean something that it clearly doesn't mean.
You seem to think that all corporations are public corporations.
You do not seem to understand the role of debt and how it relates to business and commerce.

These are several things that I noticed from your posts. The root to all these problems is lack of knowledge of the problem-domain. Normally I'd just say that you were some kid spouting off on Slashdot about things you didn't have any idea about (*gasp* I know it's hard to believe that this happens). But since you included links to an ultra-libertarian website in your signature and quote liberally from it in your other posts elsewhere in this story, I think we can see what the real culprit is. It is a very narrow view of the world based on a very narrowly-defined philosophy which bears a passing resemblance to reality but actually is not implementable in real life.

If you are really interested in free markets, I encourage you to really get knowledgable about corporations (in the general academic sense) because they are the most useful tools available to keep markets free.

Re:Just for comparison

[Bob_Robertson]

"You are uninformed about the role that an LLC plays."

Indeed, I have explicitly stated such. However, I do know that it is a creation by legislation, a distinction made by law.

"You misread my original post as to mean something that it clearly doesn't mean."

Since I am not the only one, I again suggest that the "clearly" isn't actually so clear.

"You seem to think that all corporations are public corporations."

The corporations effected by Sarbanes-Oxley are public, thus my quotation elsewhere about companies going private to avoid the increased regulation.

"You do not seem to understand the role of debt and how it relates to business and commerce."

If you mean that when a stock broker tells me that there is "smart debt" just before the 2000 stock bubble burst, and I ended up being very glad that I didn't go into debt as suggested, then you're right.

Otherwise, and to the rest of your statement, I must politely bow out. It is clear that my position on the issue, fraught as it is with naivete and experience rather than book-learning, is not at all one which you feel is valid.

I'm ok with that. I realize that there are many reasons for people to become pragmatists, reasons which I do not share. No different than religion.

I would ask you to examine just how many of the assumptions and foundations of your position are based upon government intervention.

I'm not talking about down-to-the-dirt pragmatic decisions, such as debt load verses earnings, I mean this "limited liability" verses some other "limited liability". Your original meaning of being sued into poverty verses my reading of your posting that the poverty was caused by a lack of sales. After all, being sued has its basis in a system of laws (or at least rules).

The problem with a free market is there is no such thing. That is why a "free market" position has, how did you put it? "which bears a passing resemblance to reality but actually is not implementable in real life."

Indeed there is no human endeavor that has not had government, some time some where even now, regulating it. That doesn't mean that it doesn't work. Everywhere that government influence is lessened or for a short time removed demonstrates great blossoming of innovation, industry and prosperity.

All I want to do is extend that innovation, industry and prosperity to every facet of interaction, especially commerce.

And if, by the inventiveness of interaction, something like the corporation and limited liability is created, who am I to argue? I only eschew coercion.

Bob-

Industry quibblers brought it on themselves

[A nonymous Coward]

I know far too many people who make excuses for Enron, saying they did nothing illegal, that California especially set itself up for disaster by deregulating only half the eletrical market.

But you know what? There are a zillion things any of us could do every day that are legal but immoral. Enron had no morals. They may have had great legal advice on how to skirt the edge, but their own admissions in email and memo, show they knew it was immoral. When the wholesale price of electricity jumps from 3 sents to 300 cents and stays there for exactly one hour before falling back down, something is wrong, whether legal or not.

Just as I have no respect for cops who complain about getting no respect when they won't turn in corrupt fellow cops, I shed no tears for business people who can't keep their own chicken coop clean.

This is the price you pay. You fuck with the public long enough, the public will fuck you back. Hell yes, it may be bad for business, but what they were doing was worse for society. So lump it, business boys and girls. You clean up your act, police yourselves, and earn the repeal or reform of SOX. Until then, I rejoice in what it does. Society is better off with the scoundrels roped in. Even if that small section of soceity call business is suffering a bit, society as a whole is better off.

But...

[r00t]

We need a governator. Davis was a girly-man.

Business is only a small corner of society

[A nonymous Coward]

This does not mean that U.S. businesses in aggregate benefited from Sarbox.

But it also doesn't mean that society as a whole did NOT benefit from roping in bad business practices.

Businesses aren't the sum total of society. They are a small part. If businesses suffer but society gains, who says that is a bad thing? Concentrating soley on the business part of the equation is misleading.

Re:Business is only a small corner of society

[drsquare]

But it also doesn't mean that society as a whole did NOT benefit from roping in bad business practices.

Is it worth shafting every single small to medium business just for a smaller chance of something which was incredibly rare in the first place? I don't think so.

If businesses suffer but society gains, who says that is a bad thing?

No such thing.

If businesses suffer, society's jobs suffer. Society's pensions suffer. Society's public services relying on tax revenue suffer. Society's quality of living suffers.

Re:Business is only a small corner of society

[Maximilio]

Is it worth shafting every single small to medium business just for a smaller chance of something which was incredibly rare in the first place?

Are you talking about small to medium corporations, publicly held?

Re:Business is only a small corner of society

[drsquare]

Yes, well done.

Just Whining

[lon3st4r]

I feel that it is all a big brouha created to malign a good practice.

The Act checks listed companies against accounting mal-practices. That the companies make noise against it is expected.

It makes the companies appear to be whining against a rule that allows them less freedom to do things the quick and dirty way.

Main problem...

[sheldon]

Nobody knows what Sarbanes-Oxley means...

I've had a lot of managers say we have to do such and such for SOX compliance. When I inquire as to more detail... Like what exactly, so I can make sure the solution fits within the requirements. I get blank stares.

That's a large part of the cost. The law itself is not a bad idea. It's just nobody knows how to comply.

Re:Main problem...

[floop]

SOX is all about making sure you have processes and policy to keep your business financially safe (disaster recovery, access controls, financial controls, etc.) and auditing to make sure you're following your own process/policy. If you don't have well documented process standards and policies auditors are happy to apply "industry standards" for you that usually doesn't match what you actually do. I've been through 4 rounds of "controls" audits and I believe they're a good thing. They force you to do what everyone should have been doing in the first place which is documenting important stuff in an organized fasion and verifying that you're actually following the docs. The truth is that those controls can be anything you want them to be. Don't want to do backups? Just document why and be ready to explain it to the auditor. You are still in "compliance". The CXO's hate it because they don't understand the nuts and bolts of their business and the people that understand the nuts and bolts don't understand what the auditors are doing so it ends up taking many man hours more than it really should. The audit firms prey on this. Really there isn't anything that complex about it.

If you hate SOX you probably work for idiots. If you don't see any idiots...

Re:Main problem...

[freeweed]

The truth is that those controls can be anything you want them to be. Don't want to do backups? Just document why and be ready to explain it to the auditor. You are still in "compliance".

But that's exactly why SOX is in the end entirely useless!

I can set up a corporate policy whereby all C-level execs, plus a few select IT staff, have full root access on any machine, keys to any filing cabinet, personal shredders, you name it. I can have the policy state that none of our activities are audited, monitored, or logged in any fashion. We can run a billion dollar company this way for years.

You really think SOX will do sweet diddly to prevent another Enron?

SOX is to publicly traded companies as the Patriot Act is to terrorism. Entirely useless, and just designed to make people feel better, all the while causing severe grief and horribly costly side effects.

Re:Main problem...

[Forseti]

It's hard to get a firm answer on this, so I can't be sure, but as far as I know, SOX doesn't allow you to have a policy that doesn't include audit trails. Being fully auditable, at least as far as financial-related systems go, is one of the only firm requirements.

Re:Main problem...

[freeweed]

Sorry, I was mixing terminologies.

SOX requires process control auditing. Meaning, when you say "this is how I create a user account", in a SOX audit you will have to show that that is in fact how you create a user account.

What is NOT audited is the fact that the new user account has root privledges - more specifically, SOX doesn't concern itself with WHY this is a problem. So long as your policy is "everyone has root", and you stick with it, you will pass a SOX audit.

In short, all Enron v2.0 has to do is write their processes to end up with cooking the books - and it will pass a SOX audit with flying colours.

Re:Main problem...

[skuenzli]

You said:

SOX is all about making sure you have processes and policy to keep your business financially safe (disaster recovery, access controls, financial controls, etc.) and auditing to make sure you're following your own process/policy.

And I agree. However I don't agree that:

The truth is that those controls can be anything you want them to be. Don't want to do backups? Just document why and be ready to explain it to the auditor. You are still in "compliance".

I think it is unlikely that you could ever explain to a non-conspiring auditor that your backup policy and process is adequate. SOX 404 definitely leaves a lot open to interpretation, but it's not *totally* arbitrary. There's just so many degrees of freedom that it often seems that way.

Isn't it terribly ironic that the audit industry has benefited *massively* from all the accounting scandals?

Stephen

Wrong

[A nonymous Coward]

Because one company was run by a bunch of crooks

Don't forget the banks and accountants and regulators who gave a wink, wink here and a nudge, nudge there. It wasn't just one bad company, it was an antire corrupt business climate which thought the Enron cowboys were doing a great job, thought it was pretty damn hilarious how they gamed the stupid California regulators and wreaked such havoc in the economy.

Amen!

[A nonymous Coward]

Maybe you should have called bullshit on your peers when they were busy hiding the fact that they really weren't capable of running a business.

Exactly my feelings. The people who knew what Enron was doing, the regulators and accountants and banks involved, all knew it was skirting the legal edge, and was way over the moral edge. Yet their attitude was that of a kid watching a rodeo, it was all entertainment and none of their business. Now that society has taken steps to prevent more of it, they cry foul.

Stuff it, I say. Learn the lesson and don't do it again and maybe you can earn enough respect to revise it. Otherwise, ha, the tabels have turned, and this is our game now, we get to watch you squirm as you try to find new ways to fuck us over.

Re:Amen!

[NoOneInParticular]

Given that the regulators and the accountants (and to a lesser extent the banks) are all making big bucks of the companies that need to implement Sarbox, I have the nagging feeling that they already did find a new way to fuck us over.

Re:Amen!

[_Sharp'r_]

Exactly. One of the problems is that in the case of corporate fraud, it's the company's stockholders that get hurt.

The point of SOX is not to protect the public, it's to protect the subset of the public that are stockholders from being defrauded by the company's management/employees. The problem is that stockholders in general, because of the added costs to their company that SOX creates, are being hurt more by SOX, the supposed cure, than by the previous occasional fraud.

It's like going into the hospital because you have a wart and the doctors deciding that the cure was to dip your whole body in acid. Sure, the wart may go away, but the cure is a bit more painful than the original problem.

Re:Business is not only a small corner of society

[Bob_Robertson]

The problem being that business isn't a small part of society. It is a major portion of how people interact.

Most of my interactions with other people, from a subscription to the YMCA to where I stop for cigarettes to the people I work with to the decision to mow my own lawn or hire a gardener, are business related.

The moment I step out of my door, which I bought, the actual number of people I deal with on a purely social level as opposed to the number of farmers, butchers, bakers, candlestick makers that I deal with on a business basis is very close to vanishingly small.

What reason do I have to be able to type to you this message but the ISP who doesn't know me on a social level at all, the Tier1 IP provider that doesn't know I exist at all, the Slashdot administrators trying to make a living by advertisements for which I am merely one few bytes of data in their database?

If it weren't for business, the price of tea in China would be irrelevant. But the fact is that by means of business, the price of tea in China is directly related to the price I see on the box of Oolong on my grocers shelf (who otherwise would have no interaction with me what so ever).

I think you need to look up the word "praxeology".

Bob-

SOX Never Ends

[wirq_1047]

My IT Consulting firm has a large client that hired a team of SOX Consultants to get them SOX compliant. Everytime they seemed to have checked off every item on the SOX Consulting team's list they were presented with a new list of items they must correct to be SOX compliant. Eventually they hired another SOX Consulting firm and had their suspicions confirmed that the first group was basically "inventing" reasons they were not SOX compliant to rack up a truly obscene number of billable hours.

Re:SOX Never Ends

[Politburo]

Uhh.. it sounds like your problem isn't with SOX, but with dirty consultants. I hope your company had the sense to not pay them or pursue legal action.

Re:SOX Never Ends

[wirq_1047]

The problem lies in the fact that SOX Compliance itself is more than a little murkey at times. One consulting firm said that our client was more than compliant with Sarbanes-Oxley and the other accounting firm had a laundry list of compliance issues. The problem is that to an extent they were both right because the Sarbanes-Oxley compliance law is so vague and general that there is no way to tell when you've done enough and apparently even the experts can't agree. This confusion over SOX compliance is what allows certain SOX consulants to exagerate the amount of work needing to be done and then later justify it using the "we thought you'd rather be safe than sorry" defense.

SOX would NOT have prevented Enron

[WoTG]

It's my rough understanding that the bulk of SOX is to add a whole lot of layers to make sure the numbers balance and that you know who officially made what changes to numbers.

Enron was about fraud by management. Fraud will find a way to trump any set of rules to the contrary -- except maybe moral and ethical, but those are pretty hard to quantify.

Will SOX make it harder for another Enron to occur? Yeah, maybe. Will it prevent large scale corporate collapses from fraud? Not a chance. There will always be new and ingenious ways to break the system. Never mind the legal ways for management to line their pockets. Really, you'd think a couple million a year would be enough for anyone...

exec paycut?

[Anonymous Coward]

if this is hurting these companies so badly, let the ceos take paycuts. last i heard, they were increasing their compensation dramatically.

as long as they do that, i call "BS!" when they say doing busienss is too costly.

they want more, period. none of them was complaining when they were stretching numbers like rubber bands. there's no such thing as too much to these guys. it seems every tech ceo seems to believe s/he's cheated if they aren't worth 1,000 million dollars.

the greed is staggering. the callousness is beyond comprehension.

Internal auditors just want to cover their ass...

[carlos92]

...no matter the costs to the company. They want to be absolutely safe by obtaining SOX compliance in a way that is simple for them, even if it complicates other people's job by a factor of 10. And the other people finally "delegate" this complication to IT people, like in "the program must verify that the interface transferred all the data to SAP correctly". And why doesn't the user check it himself? Or even define how the program should do the verification?

You're not the only one

[thule]

I find that most people have no idea what limited liability is. It's pretty sad. People think it's some sort of stay out of jail card when it has nothing to do with that. Movies like "The Corporation" try to imply this is the case. It's shameful.

Personally, I like reminding people that neither Standard Oil or Carnegie Steel were corporations. It kinda takes the wind out of people's sails. :)

Re:You're not the only one

[Bob_Robertson]

"I like reminding people that neither Standard Oil or Carnegie Steel were corporations."

Indeed, that would tend to hamstring those who have said that without "limited liability corporations" nothing would get done.

I recall reading how Carnegie, when selling his company, was simply handed a really big check. Not something to cash at the Quickie-Mart! :^)

Peace, may your aim never waver,

Bob-

Re:You're not the only one

[thule]

Indeed, that would tend to hamstring those who have said that without "limited liability corporations" nothing would get done.

It also shows that big giant monopoly (evil?) companies are not all corporations. Evil is evil no matter what form it takes. Getting rid of corporations doesn't get rid of evil. On the other hand having corporations is a good thing. Corporations answer to their stock holders, not just to themselves. And anyone could make (or lose) some money off a corporation's stock.

Business is a subset of society

[A nonymous Coward]

Almost all society has nothing to do with business. Do you have no friends or relatives? Even your friends where you work, do you only discuss business matters with them? Do you chat with store clerks?

Business is a small part of society. And when you talk about public businesses, which are the only ones affected by SOX, it becomes even smaller.

Re:Business is a subset of society

[Bob_Robertson]

Why would I have the opportunity to chat with the store clerks but that I was there to do business? Otherwise, I'm just wasting their time. Same with co-workers, the very reason I have co-workers at all is that I am engaging in business.

If I step in and help some guy at Home Depot who is asking a sheet-rock department sales drone about cat-5 vs. cat-3 cable, even though I am doing something without any expectation of remuneration I am there to buy, I am helping out a salesman with questions by a buyer, everything about it could only happen because of business.

My friends and relatives I can count in mere double digits. Let's say I'm at an SCA event. I might interact with 30 people on a personal level, but 30 more because they're there selling swords, beads, clothing, tents. And that's the most un-entrepreneurial environment I can think of!

Bob-

Re:Business is a subset of society

[shmlco]

"Almost all society has nothing to do with business."

Right. That's why the vast majority of adults here in the US are able to sleep in and enjoy their breakfast in bed every day.

Face it. We all have jobs. We all work. We all have to pay the rent and buy food, clothing, make car payments, and so on, or are dependent upon those that do. And to many, who they are is bound up in what they do: doctor, teacher, lawyer.

Executive Pay *Is* Too Low ...

[AHumbleOpinion]

Executive pay *is* too low and it is the source of many evils. The low pay is offset by performance based bonuses. This creates:

1) An incentive to cook the books, in both legal and illegal ways(*).
2) A short-term perspective.
3) Other bad things.

If you made the salaries large and the bonus' small then you might get more long term thinking and a little more honesty.

(*) An example of legally cooking the books: The Income Statement is going to fall a little short of expectations, that will hit me in the wallet via a smaller bonus. But wait, there's that piece of land we own that we may expand our oerations on. We've owned the land for a while, it's market value has appreciated, I can sell it and the gain will makeup for the shortfall elsewhere and the Income Statement will look good, my bonus will look good, mission accomplished. Oh, you say we'll have to spend even more money in the future to buy the land we'll eventually need, so it's a net loss. Not my problem, that's years off and I'll have moved on by then.

Re:Executive Pay *Is* Too Low ...

[BadAnalogyGuy]

Dude. Sell the land to a child company and lease the land back to yourself at very reasonable rates. You get a one-time writeoff for the child company purchase and a boost to your company's revenues for that quarter.

It just might work... ;->

Re:Executive Pay *Is* Too Low ...

[ArsenneLupin]

No need to sell the land. Just re-evaluate it to current "market value", and reflect that in your books.

Re:Executive Pay *Is* Too Low ...

[AHumbleOpinion]

No need to sell the land. Just re-evaluate it to current "market value", and reflect that in your books.

That's not allowed. Land has to go on the books under it's historical cost.

Re:Executive Pay *Is* Too Low ...

[colinrichardday]

What if the county reassesses? Which value (original or reassessed) goes in the books.

Sorry, I'm not an accountant.

Re:Executive Pay *Is* Too Low ...

[AHumbleOpinion]

I am not an accountant either. I just recall "historical basis" is required by GAAP from a financial accounting class. The difference between an asset's historical and market value would be one of the things that may differ between reports filed with the Security and Exchange Commission and "Pro Forma" reports where a company tries to sell the idea to investors that the company is worth more due to these "intangibles" that don't appear in GAAP statements. GAAP goes with historical in this case since it is not ambiguous, less prone to manipulation. It's not a perfect compromise but it's what the law requires.

Bzzzt. Wrong.

[Kadin2048]

This is wrong on any number of levels.

First, realize that the majority of stock in the US isn't owned by rich individuals. It's owned mostly by mutual funds, which are in turn used as part of basically every retirement plan, investment account, college-savings plan, ad infinium. If you have a 401k, you probably are an indirect shareholder in Exxon-Mobil (and IBM, and Microsoft, and General Dynamics, and probably Halliburton). If any of the big oil companies were to sneeze, the whole economy would get a cold.

Second, high-priced petroleum products, especially gasoline, is not necessarily a Bad Thing. I think it sucks as much as the next guy -- if I could click my shoes together and go back to the days of 98-cent per gallon gas forever, I'd be doing it and buying a Camaro before you could say "carbon dioxide." As much as Ma and Pa Jones of Pig's Knuckle, AR think that they want the Gubbermint to step in and 'do something' about the high price of gas, they really don't. Because keeping the price of gas low will only ensure that it gets used up faster, and that we don't do a damn thing to change our usage patterns or wean outselves off of it before it runs out completely.

In other words, cheap gasoline just makes us, as a nation, press the accelerator to the floor as we're heading towards the brick wall of No More Petroleum. Paying the real market price for gas is the fairest way to wean everybody off of petroleum products: and people are listening. Go down to a Toyota garage sometime and see how many people are looking at hybrids, versus a year or two ago. The difference is pretty impressive.

The oil companies will continue to charge what they think the market will bear for gasoline and other products; when the cost of transportation fuels starts to become a major source of pain to American families, they will modify their usage patterns. This is how things have to work: people have to understand that the era of cheap gasoline -- probably of cheap fuel in general -- is over. In the future, if you want to drive 300 miles to see Grandma instead of call her, you're going to have to factor in the $30-40 in fuel that it's going to cost you. That's reality; that's life.

I have no doubt that many politicians this election year will try to come up with all sorts of creative ways of basically subsidizing or otherwise artificially deflating the price of gas. But as they're doing their financial rabbits-from-hats routine, I think it's worth it for everyone to remember that "cheaper gas" doesn't equal "more gas." In fact, it really means 'less gas' for everyone in the future.

Re:Bzzzt. Wrong.

[tom's a-cold]

If any of the big oil companies were to sneeze, the whole economy would get a cold.

Sometimes you need to run a fever to rid yourself of a disease. I'm sure the abolition of slavery had some short-term economic impact too. The whole 401-based society is a transparent attempt to turn middle-class voters into miicro-tycoons who cynically vote for their economic interests rather than for justice.

Sometimes doing the right thing has negative financial consequences. Anyone who only votes with their wallet is a slimebag who is unfit to even be considered part of society.

Anyway, it's an exaggerated impact. Mutual funds, by their nature, are diversified, and also it's quite possible that more competition and less corruption will fuel economic growth in the medium and long-term. For one reason, the current competition is for access to politicians, not for operational efficiency or to serve customers. The increased margins oil companies have proudly showed off in their balance sheets are evidence of less competition, not more.

So your argument basically boils down to this: there are firms that benefit from the status quo, and a change will harm them. What your argument omits is that there are other firms, and society, that may well benefit even more from change. So even using the crass argument of utilitarianism, the greatest benefit for the greatest number may result from getting rid of the oil oligopoly in its present form.

I agree, by the way, that gas was too cheap in the US and we have behaved irresponsibly as a result. Look at energy use per unit GDP for the US compared to just about anywhere else. What that tells me is that we are wasting most of that energy simply because we can.

Re:Bzzzt. Wrong.

[3fiddy]

The oil companies will continue to charge what they think the market will bear for gasoline and other products; when the cost of transportation fuels starts to become a major source of pain to American families, they will modify their usage patterns.

Yeah, and the low income families that depend on their car to make their $15000 a year will adjust to that how exactly? Tele-commute to their maid-service jobs? their factory jobs? their low-paying-whatever jobs? And the families who already struggle to keep up with the rising cost of home heating will...what? Do more jumpingjacks to stay warm?

Maybe you mean that the wasteful upper class will be more conservative with their usage habits? Yeah. I see that happening all the time. Why, just the other day I saw some guy in a brand new hummer shutting off his engine instead of idling at a traffic light! not.

Kimberly-Clark: Benefitting From SOX

[Anonymous Coward]

The following article shows how a company can actually save money in the long run if they took SOX seriously enough.

Kimberly-Clark: Benefitting From SOX
http://www.baselinemag.com/article2/0,1397,1858071 ,00.asp

Having dealt with SOX compliance...

[itzmejoey]

...for the past 18 months, my biggest beef is that it does absolutely nothing to prevent any sort of catastrophe -- it just ensures that the catastrophy is logged in exquisite detail.

As a developer, certain procedures and responsibilities have always rested on my shoulders. I'm used to it, and I rely on them to help me do a better job. However, with the advent of SOX compliance, so many layers of crap are added to my workflow that I end up spending 4 hours documenting a 20-second fix to correct a spelling error in a piece of code.

If these new procedures were to give me any sort of confidence that my fix not only addressed the problem, but didn't cause any new ones, then I would be more open to accept them as part of my job. As it stands, though, it only extends the amount of time that potentially Bad Stuff(TM) takes to make it into production.

Even with supposedly airtight SOX-compliant controls in place, any developer at my company can easily mangle production environments at any time. Here's why: one of the big things they started off with when implementing SOX controls was that if you were a developer, you shouldn't have direct access to production systems. So, they add a few layers in there. You, the developer, can't touch production, but you can write a script and give it to someone in a "responsible position", who can then run it in production. Problem is, the person who's supposedly responsible for the system often times has no clue what the script does -- even if they actually bothered to look at the script in the first place. They may ask you what it does, simply because they need to appear to be doing their job, but does it really matter what the answer is? They blindly run the script and send you the output. They don't know what the script does, so they don't know whether the output is valid. You tell them everything looks good. Everyone's happy.

Doesn't matter whether you update a single row, or drop a table with 70 million rows -- no one involved in the process is going to actually take the time to look at what you're doing in order to determine that it does what you say it does. As long as you've convinced people you know what you're doing, you have free reign. The addition of SOX hasn't changed this. The only benefit (if you wanna call it that) I can see is that now, you've got a pile of documentation showing that 4 people assisted you in wiping out data that will take days to retrieve from tape. The only way that controls are worthwhile is if they truly prevent this sort of thing.

Re:Having dealt with SOX compliance...

[Forbman]

..for the past 18 months, my biggest beef is that it does absolutely nothing to prevent any sort of catastrophe -- it just ensures that the catastrophy is logged in exquisite detail.

Flight Data Recorders and Cockpit Voice Recorders do nothing to prevent a plane crash, either. Yet both are incredibly valuable in figuring out what happened after the fact, and helping put into place awareness of the causes, fixes, etc. to mitigate against the risk in the future.

Corporate officers have operated under a bit of a shield for quite a long time. They get to take advantage of the corporation for their own benefits without getting shareholder approval or oversight (company-backed personal loans to CxO's and SVP's, for example). Executives get to game stock options for their own benefit, etc.

SOX is good to help with some of these things, just like ISO 9x/2xxx is good for other purposes, title searches and title insurance are good for real estate transactions, etc. It's hard to see the benefits, because for many of them the benefit is simply the avoidance of having to be stuck holding the bag if shit happens after the sale transaction is completed...

*sigh*

[JKConsult]

I'm making these comments in virtually every subthread, so I thought I'd just bring them all to the front.

1) For those who are claiming that the implementation/specific requirements are too strict, could you give an example? I have had to do things required for SOX compliance (and I know of plenty of other things that my company, and others, have done), and I have to say, I have yet to see anything that I consider overly burdensome. And certainly not so overly burdensome that they outweigh the benefits of the intended effect of SOX: ensuring more accurate and honest reporting in filings by public companies, and ensuring that management is held responsible for what is in those filings.

2) For those who are claiming that the original intent of SOX is wrong, could you please explain why you think so in those parameters? There are certainly downsides to SOX, but a million posts saying "SOX sucks" or "I have to do a whole bunch of extra things so that my company is SOX compliant" doesn't mean anything. First, obviously it doesn't provide any kind of example. Second, there's no reasoned logic as to why these downsides are worse than the upsides. Which leads me to...

3) For those who are claiming that the original intent was good, but the implementation is faulty, again, could you provide examples? Personally, I feel that extra work for you (or your accounting department, or whoever) is worth it if it helps to ensure that 10-Ks and the like are as accurate as possible. There is certainly a point at which the expense to make them more accurate outweighs the benefit of that improved accuracy. But remember, as I pointed out upthread, these filings are not FOR the company, or even really FOR the government (nearly every company has two sets of books, one for tax purposes and one for annual reports); they're for you, me, and every other person (and institutional investors) trying to decide whether investing in that company, be it through stocks, bonds, or any other avenue, is a good investment. The purpose of these filings and the role of the government in ensuring the accuracy of those filings is to make sure that investors have as much (and as accurate) information as possible. This is a good thing. If you'd like to argue that it's not, I (and probably others) will be happy to do so. If you're simply trying to point out that SOX doesn't fulfill its intent, then please, please say WHY you think that, and please give some thought to how much more work you would be willing to put up with, and how much expense you think is acceptable for a company to incur, to help the markets get better information.

4) Finally, there is a very interesting argument against SOX that is getting ignored upthread. SOX is definitely a regressive expense. Small businesses are paying a higher percentage of their revenue (or pre-tax income, if you want to be pedantic) than larger companies. Is this fair? What, if anything, can be done to alleviate that problem? What slope of regression (I'm probably butchering this terminology-wise, but I think you know what I mean) is acceptable to you, assuming you believe that SOX is otherwise a net benefit?

On the whole, obviously I am in favor of SOX. I wholeheartedly agree with the thought process behind it, and in my experiences dealing with it, I haven't found anything to change my mind. If you disagree, let's talk about it. This is a very, very important issue. But let's talk about it rationally and logically. Throwing out "it sucks", "I hate SOX", and "It doesn't work" don't do anything to further the discussion.

And yes, I am a longtime Slashdot reader, and I know that it's sometimes hard to find real, thought-out discussion. But we can certainly try for it.

Re:*sigh*

[JKConsult]

2) For those who are claiming that the original intent of SOX is wrong, could you please explain why you think so in those parameters? There are certainly downsides to SOX, but a million posts saying "SOX sucks" or "I have to do a whole bunch of extra things so that my company is SOX compliant" doesn't mean anything. First, obviously it doesn't provide any kind of example. Second, there's no reasoned logic as to why these downsides are worse than the upsides. Which leads me to...

Ugh, I hate responding to my own posts, but I'm more than a little f'ed up right now, and in my somewhat incoherent rambling, I lost track of what I was trying to say in this point. What I was trying to say is that if you think the underlying intent of SOX (again, increasing the accuracy of public filings and holding management responsible for what is filed) is wrong, then please, at least simply say why you think so. The way that Slashdot works, given that often the OP is not the one who responds to the people who reply to the OP, can present a moving target when it comes to reasoning. If the OP explicitly states why they think this, then the people who reply can address that specific issue, and we don't end up with 30 different issues spreading across the whole thread and never being addressed.

Re:*sigh*

[oldbamboo]

Well said, I perceive two issues with IT SOX compliance that I would like to share, I've worked in info-sec and It audit now for about six years. I am largely in favour of SOX but the perception that it is not 100 pc yet may be due to the following; 1. SOX is not effective due to it's scope. You must monitor systems which relate purely to reporting the bottom line or general ledger, but then downstream systems which are being defrauded can legitimately be considered outside of this scope, and subsequently be utilised to further fraud with SOX impunity. 2. SOX auditors are, in my experience, technically challenged dunces, chancers, and bullshitters of the highest order, and they are far too expensive. I think that the solution, over the next ten - twenty years or so, will come from the tech sector, and from technologists, when we have a de-facto, high profile set of standards and methodologies that ensure all systems and applications are developed and maintained securely. This will probably only happen when a tech security issue engages public and commercial consciences in spectacular fashion, eg DNS being pwned for weeks. I think the solution, for IT, should come from inside, not outside.

Re:*sigh*

[JKConsult]

1. SOX is not effective due to it's scope. You must monitor systems which relate purely to reporting the bottom line or general ledger, but then downstream systems which are being defrauded can legitimately be considered outside of this scope, and subsequently be utilised to further fraud with SOX impunity.

I'm certainly not as technically-inclined as your average /.er, but it seems to me that this would be solved by simply extending the compliance requirements (or at least some of them) to include machines that directly give information to those systems that are currently covered. This would raise the expense, but it doesn't seem that it would be by that much. I could very well be wrong.

2. SOX auditors are, in my experience, technically challenged dunces, chancers, and bullshitters of the highest order, and they are far too expensive. I think that the solution, over the next ten - twenty years or so, will come from the tech sector, and from technologists, when we have a de-facto, high profile set of standards and methodologies that ensure all systems and applications are developed and maintained securely. This will probably only happen when a tech security issue engages public and commercial consciences in spectacular fashion, eg DNS being pwned for weeks. I think the solution, for IT, should come from inside, not outside.

If that's true outside of just your experience, that's certainly a problem, though not one that we're not all used to. About their expense, I would say that as we get further away from SOX's enactment, auditor prices will very likely drop and stabilize considerably lower than what they're currently at. That's typical behavior in an emerging market for particular "knowledge" and "skills" of a hypertechnical nature. In the beginning, few people have them, and they charge a ton. As others enter the field (either because they enjoy it, which mitigates the lack of knowledge problem to some degree, or purely because of the salaries to be made), prices will drop. Longterm, I think your solution is pretty dead-on.

Re:*sigh*

[oPless]

> And yes, I am a longtime Slashdot reader,
> and I know that it's sometimes hard to find real,
> thought-out discussion. But we can certainly try for it.

You don't come here often then? :o)

Re:*sigh*

[Anonymous Coward]

Sarbanes, in its intent and wording is quite nice. Granted, it does nothing really to stop another Enron... but regardless, it tries to enforce some controls around financial reporting.

The only real problem is that the big 4 consulting firms are making it as complex as possible to know "what" you have to do to make "them" happy, which is what the whole law is about... They must pay the government for the privilege to charge you a large amount of money to make them happy, so that they can tell the government that you are "A-OK". Of course, there is absolutely no conflict of interest... since they mostly charge per-hour for the audits, and a failed audit means they have to come back and charge you more.

And, if you try to be thorough and actually bring in 2 of the big auditors early on, you'll find out that the big 4 don't agree on what section 404 really means. So make sure you pick the right consulting firm.

The idea is great, the execution of handing these companies, which have had their own financial issues in the past, so much power over corporations is a bad idea. The whole thing rings true of standard government "Yeah, we fixed it!" legislation that puts a bunch of companies through a ton of loops to find out that they actually had no changes in their 10-K, but now they have tons of paperwork to prove it. While the less than reputable companies were so good at faking audits and paperwork it was probably less work for them to create the paper trail. Because all Sarbanes really does is require you to make a really good looking paper trail.

The law is fine for what it is, the only bad part was handing control of its execution over to the most corrupt set of money-grabbing companies out there... the big consulting firms.

Re:*sigh*

[TheWizardOfCheese]

Personally, I feel that extra work for you (or your accounting department, or whoever) is worth it if it helps to ensure that 10-Ks and the like are as accurate as possible.

Yes, no doubt that is what you "feel", but you are wrong. Wrong as in a point of fact, you-could-look-it-up wrong. It is an official, carved in stone, fundamental principal of accounting that the cost of an accounting procedure should not exceed the benefits. You are not supposed to make an accounting statement "as accurate as possible", only as accurate as is beneficial to the shareholders.

It is self-defeating to prevent a billion dollars worth of fraud by incurring a trillion dollars worth of cost. Note that most of your post implicitly conceeds this point by arguing the premiss that SOX is really as expensive as people claim. This is a debatable point and you are quite right to question it. But your comment I quoted betrays your underlying mistake: you are thinking of this as essentially a moral issue, as so many other confused posters have done.

I can't help but think that this moral confusion is sanctimonious. The morality posts seem to assume that the victims of SOX are the corporate executives who complain. That is exactly wrong. If SOX is really as bad as they say, it is you and I who are the victims. We will suffer because as the cost of doing business rises, the cost of the goods and services they provide will rise accordingly. We will be able to afford fewer of these goods and services. The total economy will shrink, and our retirement investments will shrink too. There will be fewer jobs and the available jobs will be less profitable for our employers and will therefore pay less.

But the CEO's will still be laughing all the way to the bank, same as always.

Re:*sigh*

[sgtrock]

The law is fine for what it is, the only bad part was handing control of its execution over to the most corrupt set of money-grabbing companies out there... the big consulting firms.

You can always do what we did when PWC said we were fine and the OCC fined us $25M; throw the bums out and get back to doing our own auditing. It's amazing what a good sized fine will do to get executive management focus on an accounting or compliance problem that IT and/or a business unit has been trying to get them to pay to fix. :)

On the whole, I think SOX compliance has definitely benefitted us as a company. We already know more about where our real expenses are than we did before we started.

Re:*sigh*

[tehcyder]

nearly every company has two sets of books, one for tax purposes and one for annual reports

Maybe in Italy...

In UK/US accounting you have to adjust your numbers for tax reporting purposes but they're always based on the one set of figures.

Re:*sigh*

[Todd Knarr]

Benefits to who? Certainly the costs of SOX compliance outweigh the benefits to the companies that have to comply, but SOX wasn't intended to benefit those companies.

Re:*sigh*

[NavySpy]

For those who are claiming that the implementation/specific requirements are too strict, could you give an example?

Sure -- SOX requires that you have a referenced change request to match /every checkin into your source control repository/. So, if you leave a DB connection open when you want it closed, or something trivial with that, you have to create a new Change Request, submit it, assign it, and then do the checkin, referring to the new Change Request, and then do the checkin, and then close the Change Request (and of course, now your QA department has to verify, etc, etc, etc).

What took about 20 seconds now takes, what? 15 minutes? At least? Yeah, that's great stuff for the friggin' /federal government/ to be regulating.

Re:*sigh*

[xnixman]

Amen! You get the same stuff from people when IT mgmt wisely decide to implement cobit or ITIL.

"There is more paperwork, waaaaa!"

So what? There is a right way and a wrong way. The implementation of section 404 via best practice management is obviously a net gain.

The only reason the cost is so high out of the chute is that systems and software processes were allowed to get THAT bad between about 1995 and 2002!

Amateurs commenting outside their knowledge

[fishbowl]

I'd read messages in this forum if I saw any that started with "I am a CPA with NN years of experience as an auditor, and I am an authority on the Sarbanes-Oxley Act...." or "I am an attorney specializing in business finance law, and I have represented clients on Sarbanes-Oxley compliance matters"...

I'm not seeing that, even browsing at +5. Do I want an accountant's design for a minimal spanning tree or a blitter? (Actually, I wonder if an accountant might deliver a novel take on a problem...) But no. People seem to be commenting because the company has recently made obvious efforts for SOX compliance, some have had to do training that they consider a waste of time, there's much more paperwork involved in any transaction that concerns money or other assets, and these procedures are no doubt presented by PHB types as "do it or die." Then they notice that their company has more accountants than anything else. Couple that with the perception that IT is a lower caste, and the resentment brews.

Then somebody links to an article about SOX and suddenly every slashdotter chimes in with an opinion.

Including me. I'm now going to look through the +5's again, and see if we've heard from anyone who actually is qualified to speak on the subject.

Re:Amateurs commenting outside their knowledge

[plasmacutter]

SOX was not made to please the accountants or to make companies more efficient.. it was written to make executives and book cookers more accountable to the public.

I'm not saying it's the best solution, but after enron it's better than no solution.

Accountants complain because they need to do more work, free marketers complain because it hobbles honest businesses, but the most important thing in my book is that ceo's complain because they're ticked theyre under a magnifying glass and can't take advantage of ken's bright idea any more.

Re:Amateurs commenting outside their knowledge

[tehcyder]

an accountant might deliver a novel take on a problem

"Is it cost effective?" is one that usually shuts people up.

Yes, I am an accountant, but I really always wanted to be a lion tamer.

Re:Amateurs commenting outside their knowledge

[fishbowl]

"SOX was not made to please the accountants or to make companies more efficient.. it was written to make executives and book cookers more accountable to the public."

The company I work for has taken a formal approach to SoX compliance and it hasn't bankrupted us or shackled us with any unreasonable amount of extra bureaucracy. One thing it has done, is educated employees, some who would have preferred to remain ignorant, about certain kinds business processes, and details about how and when our financials are reported. People who are resistant to that stuff make it very obvious that they are interested only in the narrow sphere of their own job and don't have a big-picture perspective. I'm sure that attitude gets noticed and it can't possibly have a beneficial impact on career development.

Re:Amateurs commenting outside their knowledge

[Anonymous Coward]

Including me. I'm now going to look through the +5's again, and see if we've heard from anyone who actually is qualified to speak on the subject.

Fuck that shit. By your lights, no one other than somebody with a Ph.D. in physics is qualified to discuss whether a curve ball really breaks. We are massively more subject to taking the bone in the ass when we leave it all up to experts -- in this case, the ones who whine that compliance hurts so much.

If they ever earn back the public trust, they'll be allowed to stand up again and pull their pants up.

Re:Amateurs commenting outside their knowledge

[fishbowl]

"By your lights, no one other than somebody with a Ph.D. in physics is qualified to discuss whether a curve ball really breaks."

Um, no. I'm saying I would prefer the final analysis of a nuclear plant containment system to be done by a physicist as opposed to getting a random sports fan's opinion.

Guilty until proven innocent

[$inisterAngel]

What SOX does is assume that business is guilty until proven innocent. Last I checked, that's the opposite principal of what this country's judicial system was founded upon.

Alex Epstein makes some good points in his article here.

In fact, I love the people who gripe about .gov looking into our bank accounts and personal lives, yet have a double standard when it comes to business. Here's a quote from the article above.

Under Sarbanes-Oxley, the government, without any evidence of possible fraud, has free reign to scour a company's books to determine whether they "fairly" represent the company's finances and do "not contain any untrue statement of a material fact or omit to state a material fact."

So ladies and gentlemen, why should we be fighting for privacy rights for one demographic, but not another? Obviously in both cases we have the government looking willy-nilly at records. However in the case of SOX, it's the general journals of a business, at which point an auditor can subjectively make a decision because of what they think is right or wrong, courtesy of vague and/or undefined wording in the law.

Impossible To Prevent Another Enron

[Anonymous Coward]

Sarbanes-Oxley is a *very good thing* - it exists to prevent another Enron.

You're wrong, SOX won't prevent another Enron.

Enron was a cluster of crooks. Crooks exist despite laws. There is no law whatsoever that will drive crooks away from their behavior. Enron's executives broke plenty of laws w/o SOX and they'll be convicted because of that.

Even with SOX there will be big financial scandals. To spot them beforehand, all you have to do is look for the money. Almost without exception, every business that displays exceptional profits is doing something illegal. Such firms include Walmart(labor violations, illegal labor, etc.) and Microsoft(convicted of monopoly behavior). If you've got stock in a firm that is exceptionally successful in some business sector, you probably should sell the stock now before the crooks drain it dry.

SBO is a symptom, not the core problem

[WheelDweller]

Bureaucracy is the problem. Hand anything to the government and they'll botch the job...sometimes in their buddy's favor. Evidence is all around; see also the $600 toilet seat.

So why do so many people, voting Democratic, think that turning everything over to the government is a good idea? It just boggles the mind.

(To be fair, the Republicans...the non-Conservative Republicans...have been just as bad at spending. Conservatism is about shrinking government, not growing it, and playing by the rules. Katrina was a good example of too much bureaucracy, for example- an extra level between services and people in need.)

Moving these issues to the state level and limiting liability would allow medical organizations to work out their details and keep things straight. Bringing the Fed in there means "billions" of dollars are available for a hangnail-case and a slick lawyer.

I sure wish term limits could ever be enforced; this group of clowns is inept.

Re:SBO is a symptom, not the core problem

[plasmacutter]

In the case of corporate accountability, preservation of competition and labor rights, and any industry infected with the cancer which is the insurance industry, this "lassez faire" philosophy is nothing less than starry eyed idealism of the highest order.

The government is corrupt and inefficient.. exceedingly so, but the private sectors, particularly the non-commodity based sectors such as hollywood studios, the insurnace industry, and energy, have even less accountability on this than the government. As such, without the threat of penalties, even if the regulations currently in place are not actually enforced because of graft, the private sector would be even worse.

A couple examples:
Currently the health insurance industry has jacked up their premiums so high (some 65-77%) that even major companies find the costs untennable, and small businesses are already either carrying tons of debt because of it or are priced out of the market.

Why have they done this? it's not because of some shift in medical costs.. it's not because doctors are raking it in.. it's because government oversight has been lax and the commissions which are supposed to be regulating the rates are in the industry's pockets..

I forgot which oil company reported it.. but one of them reported a full 50% (yes with a 5 AND a 0) profit margins, and the bush run government is not even auditing them to try to objectively determine weather gouging is taking place because theyre in the oilman's pockets. (mind you i said bush.. not republican.. i know of a lot of very good populist republicans)

This is very harsh as a post.. and I agree fully with you that the government is corrupt on this.. but privatizing it is NOT the answer.

Personally I think the press is laying down on the job and not holding the government accountable for it's corruption on the examples above and many others, and that is the reason why the government is so inefficient. The problem with this.. and i can't believe i'm saying this... is that the freedom of the press provision of our constitution prevents us from making sure the press, which is now nothing more than a profit driven sensationalist industry, is held accountable for this failure of oversight.

That said... with healthcare in particular, many nations at the top of the healthcare quality list have socialized or semisocialized healthcare. In addition, we have their experience and their analysis of their own national healthcare plans' shortcommings which could help us provide a better system. So long as pork barrels and petty politics can be removed (e.g. the fake "lassez faire" argument meant to funnel consumers to the insurance goons from the right and the lack of oversight which is always there when only one party drafts the legislation) then there is the distinct possibility of an efficient system being set up.

Re:SBO is a symptom, not the core problem

[Anonymous Coward]

I work for the government, and we buy from NewEgg. Screw those CDW-G guys and their GSA-approved prices, unlike them there are *no* $600 toilet seats at NewEgg. =)

Re:SBO is a symptom, not the core problem

[tom's a-cold]

Bureaucracy is the problem. Hand anything to the government and they'll botch the job...sometimes in their buddy's favor. Evidence is all around; see also the $600 toilet seat.

It was a contractor who billed the government for that. So the fault lies not just with the government, but with the process that enabled that collusion. I have had to deal a lot with HMOs and insurance companies recently, and believe me, uncaring, sneering, parasitic wastefulness is not unique to the public sector. In fact it can be worse when there is a financial incentive to give bad service, avoid accountability or overbill.

Anyway, conservatives are inconsistent about whether government is always incompetent. When regulating business, they say it is. When spying on us or invading another country, suddenly it's nothing to worry about. So the real debate isn't about efficiency at all. It's about what the government should and should not do.

Another Example

[obnoxiousbastard]

This is another example of clueless politicians trying desperately to look like they are doing something useful and making a mess.

The idea behind Sarbanes-Oxley is a good one but the record keeping requirements are redundant. They are already covered by GAAP (Generally Accepted Accounting Principles), SEC regulations and various state and federal laws. Sarbanes-Oxley merely adds another layer.

If an ENRON or Worldcomm is cooking the books, another layer isn't going to help. In these cases the real actors in the conspiracy were a tight circle of executives using a set of books that their accountants never saw.

Off-topic: oolong,smoking?

[Flying pig]

How can I possibly take seriously the views of someone who smokes and drinks Oolong? You might as well stick to the floor sweepings they put in teabags, since you've taken the decision to wipe out your taste buds followed by your epithelial cells and possibly uncontrolled cell division of your lung tissue.
It's almost as bad as people who think they are sophisticated and smoke cigars while drinking port - which should be at least a capital offence in any truly civilised society.

Re:Off-topic: oolong,smoking?

[Bob_Robertson]

"How can I possibly take seriously the views of someone who smokes and drinks Oolong?"

I do neither. I despise tobacco smoke. It is, however, irrelevant to the discussion what *I* do. You are engaging in the fallacy of attacking the messenger, a paper tiger that doesn't even exist.

Bob-

Re:Business is not only a small corner of society

[namespan]

The problem being that business isn't a small part of society. It is a major portion of how people interact.

Which is precisely why it's important that businesses are run in a circumspect and ethical manner.

Sarbox may not be the specific answer, but the reason it exists is fairly sound: internal controls weren't working. They often don't work.

This makes sense if you're willing to accept the negative side of the profite motive along with its positive power.

Federal regs don't provide the expected benefits

[dogugotw]

I work with a couple of regs on a daily basis; SOX and 820 (FDA). The ideas behind these regs are great - protect the public from evil companies. The reality is that a 'good' company will do the right thing more often than not just because that's how they work and a 'bad' company will find a way to work around the regs. Good companies will incur extra overhead while bad companies will not.

I guess the upside is that these regs do help the economy (at least one part of it) by keeping consultants alive. As I recall, SOX has totally revitalized the small and medium size accountant space and the bigger firms are rolling in dough now. Sweet!

I'm from the government and I'm here to help - still true today.

And these results are surprising because ...?

[OneSmartFellow]

Seriously, when have you ever seen Govt. regulations improving cost to benefit ratios ?

should be no surprise

[argStyopa]

...that the /. header is entirely MISleading.

RTFA. The header says "Costs Exceed Benefits" implying a fact.

The article is about industry execs telling the SEC that they don't think it's worth it.

That's about as opposite as you can get.

But this is slashdot, this is like -1, eternally redundant.

I'd say that it's closer to 50-50

[Morosoph]

Your close friends and family may be relatively few, but that is a distortion, given how much time you spend with them. Five minutes with a clerk does not compare with an evening at the pub with good friends.

The store clerk you chat to would still be there if the economy was less productive, and so everyone had lower wages, so for the intended purpose of the example (the importance of production), it doesn't count.

Specific examples, where you meet other like-minded engineers (for example) do count, as engineers design new things, so less growth means fewer engineers, so that the network effects would be weaker (more of your interactions would be with those with whom you have less in common).

I agree that business transactions are social, but that is far from the whole transaction; you also need to look to the opportunity cost of business. Is the person that you're talking to the individual that you would really most want to talk to right now? Business restricts, as well as enabling social interaction.

On the other side of the coin, maybe necessity aids society: easier travel through wealth has meant that we interact with more people every day. This has got to be a factor in increasing divorce rates (say). By encouraging us to be open to new social encounters, it will weaken existing commitments (on both sides), as well as bringing new opportunities. Similarly with commitment to friends.

I'm not arguing both sides to appear stupid: I'm positing that there's no reason why the balance is optimal when the criterion is productivity rather than the state of society. You get what you optimise for.

Unless you're government, of course, and this is the crunch. Politicians and bureaucrats neglect the intrinsic value of concepts such as freedom, but although freedom is important to business, substituting productivity for freedom is to distort what freedom is. Look at the latest batch of anti-terrorism laws, or the DMCA to see this. Because freedom can come into conflict with (eg. 'intellectual') property, taking the side of business is too unsubtle.

Re:Misleading movie recommendation?

[it0]

Why does imdb say:

Recommendations

        If you like this title, we also recommend...

        Titanic (1997)

Sarbanes-Oxley Act is good for the economy!

[mshiltonj]

Sarbanes-Oxley Act creates jobs! My small company had to add more staff members to the finance department to deal all the new forms and paperwork. But we lost a client, and revenue isn't going up, so we now have a freeze on development hiring.

But the finance department sure is busy.

Re:Sarbanes-Oxley Act is good for the economy!

[Anonymous Coward]

You could get SOX removed, as long as you had the C*O and the board personally and jointly liable for the accounts. What ought to happen to Berrnie is that all his goods are taken and sold off to pay back debts. Same with the other execs. If they don't like it, well, they are being paid the big bucks to take the risks.

The Great Pumpkin

[Morosoph]

Heretic!

MOD PARENT UP

[thealsir]

Lots of chicken little stuff going on around here. I think people have to stop assigning blame to a part or system, saying the system is wrong, when it is the people who are wrong.

People kill people, people make companies go from $80 to $0.60.

Don't like the law?

[HangingChad]

First fund some bogus studies that show how expensive and ineffective it is, then hire a PR firm to make sure those results get extenisve press, at the same time shovel money hand over fist to your Congresscritters. It's a big, bad issue and Congress must act...before the corrupt party gets thrown out of office and we have to start all over bribing a new set of lawmakers.

Same strategy Bellsouth is using with the net neutrality innitiative and before that how RIAA and the MPAA managed to equate file sharing with stealing in the minds of the Great Unwashed Masses. MSFT also uses the same song and dance routine from time to time, more on the local level.

Re:Don't like the law?

[rdean400]

It's a big, bad issue and Congress must act...before the corrupt party gets thrown out of office and we have to start all over bribing a new set of lawmakers.

I think you're not being honest here. You should replace "bribing a new set of lawmakers" with "bribing the other corrupt party".

Another example of Government does not know best

[bkedersha]

Just because some mental midget Senators, actually, their staffers, come up with a new regulation, does not mean it is the best or even if it works at all.

Expensive for WHO?

[Maximilio]

The shareholders who are going to get reamed?

Serious competitive disadvantage

[EllisDees]

The requirements of Sarbanes-Oxley on a corporation are nothing but a huge expense that private companies don't have at all, putting them at a real disadvantage in the marketplace. The millions of dollars that are being spent by even medium-sized companies could be much better spent elsewhere.

Re:Serious competitive disadvantage

[tehcyder]

Yup, let's just get rid of all those auditors, compliance officers and the rest entirely, they're pure wasted overhead.

Let the market decide, the Invisible Hand always knows best.

Difficult to swallow

[Maximilio]

Corporate profits are up across the board. Companies are raking it in. I'm having a difficult time imagining these people going home crying because they just can't keep up with the costs of SOX.

as not a US citizien ...

[MaoTse]

I'm just a sys admin from a Eurpoean country but I seriously believe SOX has got very positive impact on IT and it just started too be felt.

Identity management, that's what it is. How many times we struggled with heaps of "well known accounts" with no logging whatsoever ? Oracle, unixes, brain dead windows deployments... All of them with "impossible no track users activity" requirements.

Now it can be seen ldap, rbac, database auditing technologies start to have a their warrant place in most of offers. Just look what Oracle, Sun, IBM are marketing to you. That's good.

It's still a long way to go for most companies, specially outside US I guess. Bit I still, I like the trend ;-)

CEO crooks, programmer headaches

[dcroxton]

What I can't understand about Sarbox is this: some CEOs and CFOs commit fraud, therefore a peon like me has to jump through a lot of extra hoops to do his job. Huh? I am in *no* position to embezzle money or otherwise ruin the company. The law should be concerned with high-level controls, but instead it reaches down into the lowest levels of a company. That's why the implementation costs are exhorbitant compared to the benefits.

Agree, it's crap

[stlhawkeye]

Like all such laws, nobody really understands what the regulations mean/don't mean, and require/don't require until a case is tried and some kind of common law precedence is set. So everybody is going WAY overboard to avoid getting snagged by this on some minor technicality. It's a typical government overreaction to some isolated bad practices. And yes, I work with a company that has to deal with SOX first-hand. Our compliance department makes us take SCREENSHOTS of source code in the repository for SOX compliance. Stupid. It proves nothing.

You have sunk my ...

[ari_j]

Thanks for the calm, rational post. I think the main argument against SOX is that you can't invest in Nigerian barges nearly as easily as you used to do. ;)

People

[Bob_Robertson]

"people make companies go from $80 to $0.60."

People also make companies go from $0.60 to $80. But in order to do that they have to satisfy their customers better. The reverse certainly has little or nothing to do with satisfying customers.

The freer the market, the more fickle customers are allowed to be. Enron and Worldcom were punished quickly and decisively by going bankrupt, long before anyone was in jail.

Bob-

Big Sarcasm

[ScentCone]

The scary thing is that a typical pro-big-business Republican would agree wholeheartedly with my paragraph, without sensing its sarcasm.

No, the scary thing is that people who are reflexively anti-business think they have the intellectual market cornered.

You are a shill for Big Sarcasm and their academic cronies, who are illegally attempting to muscle out the use of irony and satire by anyone who also happens to like things like antibiotics, refrigerated meat, large airplanes, high-speed video cards, MRI machines, WiFi-enabled every-freakin'-thing, and the ability to be sitting, right now, in front of nice shiny computer connected over an incredible network of industrial networks to a discussion board that ain't operating just because Taco is feeling warm, fuzzy, and charitable.

That you think comparing a regressive regulatory regime that punishes the very small businesses you would appear to prefer with, say, child labor and asbestos-based face powders... well, that's proof of either your rhetorical shallowness or the contempt with which you regard your audience. But then, that's the hallmark of Big Sarcasm, and those of us not falling all the way off left side of the page need to make sure that such a valuable tool of communication doesn't completely come under the influence of a Convicted Idealogical Monopolist. So come on, you libertarians, business owners, investors, and other non-socialistas: stop being so literal, reasonable, and direct. Start swapping some Open Source Satire. Think of the left-handed children!

Re:Big Sarcasm

[Quantum Fizz]

You are a shill for Big Sarcasm and their academic cronies

Damn, who told you? It must have been the other NSA (the National Sarcasm Agency) who outed my secret identity.

SOX is silly

[BitterAndDrunk]

Here's the big beef I have with SOX:
Enron/Andersen's shredding of the evidence was illegal already.

It's similar to the "tougher anti-immigration bills" floating around some state legislatures. It's merely posturing. We call them illegal immigrants for a reason.

The same applies to this whole SOX thing. It was a reactionary law (which history tells us are the worst laws) to the myriad of corporate corruption cases bubbling up then.

There's a more effective method than new laws, which would be enforcing our current laws appropriately, and punishing white collar criminals with a scale that reflects the massive societial damage their deviance causes. A convenience store armed robbery is often punished more severely than embezzlement. This shouldn't be the case, as someone like Ebbers or Lay wreak far more havoc than a crackhead looking for a score. But the crackhead is typically punished more harshly.

SOX didn't assist in preventing white collar crime, or "accounting irregularities" if you want a euphemism. All it did was make politicians look effectual and spawn a consulting racket.

I've got your upside right here

[metamatic]

But if I were a software company, I sure-as-hell would be looking for an upside in the SO legislation, and I don't see any other "good" routes...

I work for IBM Software Group, and we've sold a ton of Sarbanes-Oxley compliance solutions.

[Ha ha, only serious. Opinions mine, not IBM's, etc.]

Ok...

[sheldon]

How does SOX apply to source control systems?

At a minimum what do we need in place?

Is it good enough to have RCS in place? Do we need to have a requirement tied to every change made to the source? What do we need at a minimum?

How long do we have to retain this information? 5 years? 20 years?

It sounds simple on paper, and I agree that at a minimum it does force you to be able to understand what you have where and how it got there. But it's the little specifics that cause all the problems.

Here is somthing not mentioned in the article

[Darkseer]

Did you know that the SEC and the PCAOB are very aware of the cost of compliance. To this end the SEC exempts about 50% of smaller business (those with a market cap 70 mill) from the rigor required for 404 compliance. The article is based on an out of context quote. In addition, this is one small group complaining, not how the law is actually applied. You can refer to the PCAOB web site and read or view the discussions and advisory group meetings to have a greater understanding about the exemptions, from the source, not a disgruntled business owner.

SOX Irony

[TonyXL]

Accounting companies commit crime, so let's pass legistation to reward them with more business. Unbelievable.

SOX did come from the government

[X86Daddy]

Seriously, in the last few decades, has Congress produced *any* legislation where the benefits exceeded the costs? It seems that the only thing they're capable of is making their friends richer and ensuring they keep their jobs. Since the system is built so that keeping their jobs == selling out to the highest bidder rather than actually *doing* their jobs (the whole representing the people thing), this won't be changing anytime soon, and I don't understand why there are still people who don't see this. Oh, I forgot, they also pander to the emotional voting blocks who want them to make good sound bites regarding issues the government shouldn't actually be involved in.

I'd like to actually be more optomistic or cheerful about this, so really, has there been *anything* they've done recently that was a net win for the people? Is this ever going to change?

Re:Bzzzt. Wrong-Teleband.

[Anonymous Coward]

"The oil companies will continue to charge what they think the market will bear for gasoline and other products; when the cost of transportation fuels starts to become a major source of pain to American families, they will modify their usage patterns. This is how things have to work: people have to understand that the era of cheap gasoline -- probably of cheap fuel in general -- is over. In the future, if you want to drive 300 miles to see Grandma instead of call her, you're going to have to factor in the $30-40 in fuel that it's going to cost you. That's reality; that's life."

Maybe telecommuting will make a comeback, and drive the need for broadband. It may even mean growth in those fields that more readily lend themselves towards it. Remember peapod? You may see growth in that kind of business model. The trickle effect will show up in some of the darndest places, but I see it as a win win in the long run.*

*As an example I'm looking at a well-paying job that requires broadband.

From an auditors standpoint - This sums it up

[mackermacker]

As someone who performs security auditing full-time for one of those big annoying auditing firms, here is our view on this.

I smell BEEEEEE ESSSSSS

[jafac]

By it's very nature, you can't measure the benefits of SOX.

Without SOX, we don't have enough information to even know how much corporate fraud is going on. So how the hell do you measure what the cost of that is?

WITH SOX, because of the reporting requirements, fraudsters have to change their behavior, perhaps even behave honestly. That's worth a great deal, because as you see recently, the DJIA has begun to creep back up after it's 4-year flatness, because people didn't trust the market, because after Enron, Worldcom, etc. they all knew that the market was rigged by scam artists. So they put their money into housing. Now it's commodities, especially precious metal and petroleum. But some of that's coming back to the DJIA, because at leeast a small sense of trust in the market has returned.

Profits

[ChrisMaple]

I just checked the profit margins for Exxon-Mobil, Conoco-Phillips, and Chevron. The average is about 9% and the free cash flow is less than the net profit. Just how much of this do you think oil companies should throw away to make you happy? Should they cut prices by 20%, so that they'll soon go out of business? Want to guess what happens to the price of gasoline if supply is cut drastically by the failure of a major supplier? The people who are complaining now won't stop complaining if the price falls 20%. They'll cheer if a major supplier goes bankrupt, and they'll still be cheering as they freeze to death next winter.

Fuel prices are kept high by government taxes and regulation. End the government meddling, and prices will fall by more than anything the oil companies could legally do on a continuing basis.

Econ 101

[Anonymous Coward]

If the market is controlling prices, then big oil wouldn't be raking in ungodly earnings, they'd have a steady cash influx just like every other year.

Uh, well, yeah, it would. They're setting price $X, and the market is clearing. That's how the market works.

If people didn't want to pay $X for petroleum, they wouldn't pay it. Then the oil companies would be forced to lower prices. They can charge as much as they want -- if nobody wants to buy it at that price, they wouldn't earn a cent.

Go directly to ECON 101. Do not pass go, do not collect $200.

Hybrids?

[Anonymous Coward]

Paying the real market price for gas is the fairest way to wean everybody off of petroleum products: and people are listening. Go down to a Toyota garage sometime and see how many people are looking at hybrids, versus a year or two ago.

I was with you until here.

"Hybrid" is a technology -- a means, not an end. In case you didn't notice, every mass-produced hybrid you can buy today still runs on petroleum. And many don't even get great fuel economy. Here's a Toyota hybrid that gets 21.5 mpg. My car gets more than double that *for city driving* (and even better on the highway), and it's not a hybrid. (And I don't run it on petroleum.)

I'm all for high gas prices that force people to find alternatives, but getting SUV drivers to buy SUVs that get a couple more MPG, with a big "HYBRID" sticker, and think that's all they need to do, will not help us.

We need serious solutions to the energy problem. Even if everybody switched their gasoline car to a hybrid, population growth would wipe out the improvement in a year or two.

Re:Internal auditors just want to cover their ass.

[tom's a-cold]

And the other people finally "delegate" this complication to IT people, like in "the program must verify that the interface transferred all the data to SAP correctly". And why doesn't the user check it himself? Or even define how the program should do the verification?

Because most IT people reading this will immediately see the following: it's a requirement to make the transfer transactional, and use of a checksum will give good confidence that the information's integrity was not compromised. The last thing you want is users checking things like this. Not reproducible. The occasional audit, yes. But the main path, no.

Anyway, when you write your functional requirements, it's your responsibility to prove to the business that your approach will meet the need. That's what validation is. It's not their job to tell you how to do it. I've been down that road, and you don't have to travel far on it before you encounter madness.

Archiving Emails

[Anonymous Coward]

I read through Sarbanes-Oxley, with the focus of determining what the law requires in terms of archiving of emails/correspondence. It seems that this applies to financial records only, not day-to-day stuff. Am I correct? I have a great concern otherwise, if it's required by the SEC to archive ALL emails/correspondence. There are much larger implications with that. Sure, it's easy to do - and transparently so end users don't even know about it - but it's not necessarily the "right" thing to do, IMHO. Can someone clarify on that?

Income???

[beakburke]

Income is a lousy metric to compare a very specific expense to. Section 404 is only one part of the regulation. Fundamentally, it the cost has to be evaluated by the benefit it delivers, and the evaluation needs to be at the margin, not the average.

In other news...

[try_anything]

A fidgety guy on a street corner reports that police patrols are a waste of taxpayer money.