shareholders

An unusual approach to Sarbox compliance

Tue, 22 Apr 2008 06:59:59 -0400

If you're a small public company, you've got some big compliance issues to deal with. Many are likely behind the curve--even with the latest delay from the SEC. Companies that take a proactive approach will reap the benefits later, obviously. Which brings us to Winner Medical Group, a bulletin board company based in China. It has taken the unusual step of issuing a press release to tout its Sarbanes-Oxley Compliance Project, which started up in January. The release lists the main steps it intends to take toward compliance; a promise of sorts. This is a bold idea, one designed to assure shareholders that the company takes this seriously. I doubt it will start a trend, but it does make quite a statement, provided it's more than mere PR.

For more:
- here's the release

Related Article:
Time to think about identity management

Search the web for: Winner Medical Group

SYMS saga takes new twist

Tue, 19 Feb 2008 06:59:59 -0500

Recall that retailer SYMS decided to deregister and trade on the Pink Sheets to save the money it would have spent on Sarbanes Oxley compliance. Well, some hedge funds didn't like it and put up a fight. They sued the company after its shares tanked and succeeded in forcing the company to re-register as a Nasdaq listee. So what's the lesson here? Can we say shareholders in general seem to like Sarbox? Maybe. Maybe not. But if you are going to cut your Sarbox costs you had better do it in a way that doesn't gut shareholder value. Short of a buyout, what is that way?

For more:
- here's the press release

Victim of Sarbox: Annual reports?

Tue, 12 Feb 2008 06:59:59 -0500

There was day when companies took pride in their annual reports. Pre-Internet, it was a major vehicle for communicating with shareholders. And it showed. They were well-produced documents. These days, annual reports tend to be mere shells, some are derisively called 10-k wrap, notes an article in The American. To what extent is this the fault of Sarbanes-Oxley? In one view, the law has encouraged a take-no-chances mindset when it comes to reporting. Why not just repackage what has already been filed with the SEC and been deemed compliant? On the other hand, companies truly interested in providing insightful information these days would likely do it on the Internet. And why not? So while the state of the annual report is dismal, it reflects a lot of things--including reality.

For more:
- here's the article in The American

Sarbox battle erupts over retailer

Tue, 15 Jan 2008 06:59:59 -0500

We've been debating the costs vs. benefits of Sarbox for a while now. Has the conventional wisdom shifted at all? Despite acknowledging the costs of Sarbox, deep down, people will always see a move to the Pink Sheets as a red flag. Consider retailer Syms. Its stock tanked in December when it announced it would delist from the NYSE. It said it could save $750,000 a year by avoiding Sarbanes Oxley. That's a big savings for a small firm. But shareholders took issue with the move. To them, the company has given up liquidity and gutted the stock, which outweighs the cost savings. The moral here is that a desire to avoid Sarbox, while understandable, will lead to questions. Perhaps more so now than just a few years ago. Unfortunately, going private may be more difficult these days.

For more:
- here's an article from NJ.com

Smart money betting on XBRL mandate soon

Tue, 18 Dec 2007 06:59:59 -0500

The likes of Microsoft, General Electric and Ford are already filing information in XBRL. One might bet that a formal requirement is an inevitability. Or a bet that such reporting is a just a good idea. Or both. So far, about 61 companies file reports with the format. Many top banks have gotten their feet wet by filing information using the language with the FDIC. Interestingly, some executives are said to fear a formal requirement because they think it will lead to Sarbanes Oxley like upheaval. Really, the best course of action is to start tinkering now. It is reality in the making. Your shareholders will likely thank you.

For more:
- here's the article from eWeek

Another small company 404 delay

Tue, 18 Dec 2007 06:59:59 -0500

For much of the year, I had been telling people not to hold their breath for another Sarbanes Oxley 404 delay for nonacclerated filers. My point was you couldn't count on any sort of regulatory decisions, so your smartest choice was to act as if you would have to comply. But it appears as if small companies will get a holiday gift in the form of yet another delay. Previously, small firms were required to comply with 404 if their fiscal years ended before Dec. 15, 2008. The head of the SEC has proposed another one-year delay, one that many of the 5,000 affected companies will applaud. Christopher Cox told Congress he wants some time to study the competitiveness issues. Who knows, the way things are going, the requirement could be scrapped all together. Here's an idea. Comply anyway. Shareholders just might show their appreciation.

For more:
- here's a New York Times article
- the Council of Institutional Investors is not happy about this
- Grant Thornton opposes another delay. Release

More fraud, smaller penalties

Tue, 27 Nov 2007 06:59:59 -0500

According to the L.A. Times, the Securities and Exchange Commission launched a record 656 cases in fiscal 2007. That's a 14 percent hike over 2006. Penalties came in at only $1.6 billion in fines and illicit profit, compared with more than $3 billion a year earlier. So what's going on? Well, it may be that the massive cases of fraud--the Enrons and WorldComs--have disappeared, leaving much smaller cases. There was a lot of anger about the stiff penalties. More than a few argued that shareholders were being hurt by fines that were not in proportion to the crime. The SEC responded, and the numbers speak for themselves.

For more:
- here's the L.A. Times article

Read more on: The Securities and Exchange Commission (SEC)

How to commit financial crimes

Mon, 14 May 2007 20:01:39 -0400

A new study, "Control Overrides and Financial Statement Fraud," by the Institute of Fraud Prevention has looked at 834 companies filing restatements and found that it apparently takes teamwork to perpetrate fraud. About 45 percent of the restatements studied resulted in charges of securities fraud by shareholders or the government. The study found that an average of seven people--the CEO, CFO, Chief Operating Officer, general counsel, members of the Board of Directors, and internal and external auditors--were involved in these cases. So what does this mean? Well, even before Sarbanes-Oxley, fraud seems to be something that was rationalized by group-think. Hey, if everybody says it's okay and everybody's doing it, it must be. The options back-dating scandal comes to mind. The issue is whether the same mentality holds today, post Sarbox. My sense is that Sarbox has changed the mentality but perhaps not completely. There will always be those who succumb to temptation. Hopefully, their peers and auditors will make them less comfortable indulging their whim.

For more:
- here's an article from accountingweb
- here's the study

Sarbox leading to shorter investment time frames?

Mon, 12 Mar 2007 20:01:39 -0400

It's been pretty well-documented that Sarbanes-Oxley has led to more job turnover among CFOs. But a new survey, by CFO magazine and a Duke professor, has found that it is a big factor in the rise of even shorter time horizons for corporate investments. More than 87 percent of finance chiefs say that shortened payoff horizons coincide with the shorter tenure of executives. This could be seen as another of those unintended consequences of Sarbanes-Oxley. But there are other issues at play. The need to satisfy shareholders is a much bigger reason, I would think. Basically, the C-suite is a hostage to the stock price. Many would say that boosting the price is a moral imperative. This predates Sarbox and it exists still. So while Sarbox has made life miserable for more CFOs, I'm not sure you can pin shorter time horizons on the law.

For more on the survey:
- here's an article from CFO.com

How to control for options dating miscues

Mon, 26 Feb 2007 19:01:39 -0500

It is often said that Sarbanes-Oxley has solved the options mis-dating scandals, given that the new rules basically ban improper backdating. But that would be a bit naive. The bottom line is that options controls are now something that the board must evaluate and perhaps even attest to. It would be hard not to call it a 404 issue, especially in the current climate. Of course, one could do this all manually. But many big companies will likely want to consider one of the emerging automated solutions. It boils down to a time-stamp issue in many cases, which may require a common and inexpensive time server. The thought is that a system will be able to note exactly when options were awarded and cross check that with the options' stated grant dates--all in a way that is audit-able. It may be worth looking into.

For more:
- here's an article from Wall Street Technology

Related Articles:
Options scandal: Where were the auditors? Report
Meet the man who uncovered the options scandal. Report
How much will the options scandal cost shareholders? Report