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"Pay Dirt" (October) addresses the sticky topics of executive compensation and new regulatory demands. As leaders of Corporate America, we must recognize that new regulation is a direct result of abuse of privilege.
Financial executives are correct in supporting the Securities and Exchange Commission's latest requirements for executive-compensation disclosure. In a June survey by Oversight Systems, 64 percent of financial executives said companies should explicitly report a postemployment agreement on compensation (that is, a golden parachute), and 58 percent said companies should explicitly report the dollar value of all noncash and nonstock compensation and benefits greater than $10,000. Only 18 percent said the SEC should not regulate disclosure of executive compensation. Further including exec comp in SEC filings invokes the controls inherent in Sarbanes-Oxley, tightening the relaxed approach taken toward stock-option grants, among other things.
As with any other SEC regulation, finance executives should implement strong controls and standardized processes for granting and reporting on executive compensation.
Patrick Taylor
CEO
Oversight Systems Inc.
Via E-mail
Seeing the Benefits of Sarbox
I found your discussion on the cost-benefit constructs around Sarbox very interesting ("Numbers Crunch," September).
The results of your CFO survey ("Progress Report") align with my own experience, with a majority of public-company CFOs that I speak to perceiving the benefits of Section 404 to exceed the direct and indirect costs by a considerable margin. In fact, based on my admittedly anecdotal perspective, I suspect that a respectable number of CFOs also agree that it is more desirable to adhere to more-stringent compliance imperatives and access traditional capital markets than to seek more-liberal compliance environments in less familiar territory.
In my personal view, perhaps the CFOs see benefits to Sarbox that the naysayers have ignored. Could it be that the difficult- to-quantify transaction costs and the risks associated with more-liberal compliance environments favor the U.S. capital markets after all?
Jai K. Sudharsan
Lead Adviser, Strategic Client Services
Commercial Solutions Group
Perot Systems Corp.
Washington, D.C.
Trick or Treat in Business Reporting?
The article on fair value ("Will Fair Value Fly?" September) is timely, and Ronald Fink has done a thorough job in reviewing the pros and cons of traditional accounting-based reporting and fair-value reporting, warts and all. It shows the urgent need for improved company reporting.
With all its excellent examples and quotes, the article leaves you with an eerie feeling that someone (FASB or the IFRS?) is trying to pull the leg of the international business community. If it were not such a serious matter, and if one did not know that the people serving on the Financial Accounting Standards Board are really serious people, the whole concept might qualify as a Halloween prank.
After reading the article, no one could believe that transparency would be served if the cobweb of traditional accounting is replaced with the even thicker cobweb of fair-value reporting. Transparency, reliability, and relevance should be restored to company reporting, but that calls for new thinking and a new system of all-inclusive business reporting, not a rehash of transactions- based accounting spiced up with guesswork about an uncertain future. J. Michael Cook of Deloitte deserves kudos for boldly declaring that financial statements are almost completely irrelevant, and also for his advice that it is time to go from defense to offense.
The long overdue debate on realistic business reporting got a well-deserved kick forward from your article. I am eagerly waiting for the next round.
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