VideoPerhaps there is a kinder, gentler side to the Securities and Exchange Commission after all. With companies straining to meet the requirements for documented and audited internal controls by the end of the year, the SEC has apparently taken pity. While it is holding to its schedule for compliance with Section 404 of Sarbanes-Oxley, it is expected to delay the deadline for a second project — accelerated filing — by a year.
The September proposal, which is expected to pass this month, would give companies another year to begin filing annual reports in 60 days and quarterly reports in 35 (as opposed to the current 75- and 40-day requirements, respectively). The earlier deadlines were supposed to go into effect as early as December 15 for many public companies.
The SEC says its change of heart, prompted by a joint letter from the Big Four accounting firms to SEC chief accountant Donald Nicolaisen, is a recognition that public companies are already dealing with a raft of new compliance issues, especially the Section 404 regulations. In a statement, the commission said it wants to make sure companies "implement the internal-control requirements with the care and attention we believe is desirable."
It's not the first time Nicolaisen has shown sympathy for firms struggling to meet Section 404 requirements. In June, he reportedly told Dow Jones that he might favor postponing the implementation of the Financial Accounting Standards Board's stock-option expensing rule until 2006. It's currently expected to go into effect in June 2005.
Doug Pierce, assistant controller at Denver-based Red Robin Gourmet Burgers Inc., was one of several finance executives who wrote a comment letter to the SEC suggesting that it was 404 compliance that should be delayed instead, noting that shaving 15 days off reporting deadlines offered little help. "404 is probably the most granular piece of accounting literature I've ever seen," says Pierce, who says it has more than doubled his workload. "I wish they could spend a day in our shoes."
Several small-company CFOs took the opportunity to argue against being included in the "accelerated filer" group. "The larger issue to me is the ridiculously low threshold of $75 million in public market cap," wrote Robert B. Fowles, CFO of Spectrum Organic Products Inc. "All this does is create additional opportunity for errors and shoddy MD&A reporting due to the time crunch."
Elaine Meyers, CFO of Franklin Financial Services Corp., also takes issue with the $75 million threshold: "[It] puts undue pressure on small companies with limited personnel resources." —Tim Reason
Hello There
It's no secret that American companies outsource call centers to lower-cost locales. But customers often have no idea whether they are speaking with an operator in Baltimore or Bangalore. That's because overseas call centers go to great lengths to help their staffs sound American, teaching them American accents and colloquialisms like "OK" and "no problem."
Prof. David Butler, of the University of Southern Mississippi, says operators also learn the names of U.S. sports teams and use American-sounding names. "They are trying to connect with callers," he explains.
They are also trying to avoid hang-ups. A survey by BenchmarkPortal Inc. found that 65 percent of American consumers would change their buying behavior if they learned a company was using an offshore call center. So it's not surprising, says Butler, that some operators are taught to lie and say they are located in a U.S. city if asked.
"There's nothing inherently wrong with accent neutralization. It helps communication," says Don Van Doren, president of consultancy Vanguard Communications. "But when it gets deceptive, it can be damaging. You don't want conversations to start from a position of mistrust." —Joseph McCafferty
The Telephone Game
It's been just over two years since Sarbanes-Oxley began requiring companies to provide employees with a way to anonymously report financial misdeeds. In practice, that has usually meant setting up telephone hotlines, most of them open to any type of ethics complaint. But along with each call about financial fraud, companies take dozens of calls on everything from gripes about co-workers coming in late to complaints from workers who say they are underpaid.
For employers, that means sifting through many calls to find the ones that require immediate attention. "We are finding it is a productivity drain," says Tyco senior vice president of corporate governance Eric Pillmore. "But you don't know when that one call will come in that [is about] a critical issue." Tyco has a full-time employee devoted to taking hotline calls.
At smaller EnPro Industries, a manufacturer with 4,400 employees, human-resources director Sheri Tiernan says its hotline, now in its second year, averages a manageable three calls per quarter. "Fortunately, we have not had any calls of [a Sarbox] nature," she says. Nonetheless, all of the calls are investigated and quarterly reports on hotline activity are provided to the audit committee.
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