VideoBut companies that crack down by enforcing stringent sick-time policies (or offer none at all) risk "presenteeism": sick employees show up but do little work and infect their co-workers.
Barry Blass, CFO of Hachenberger Management, a holding company that owns and manages more than 40 businesses ranging from realty to horticulture, recommends a middle ground: his company instituted a paid-time-off bank five years ago that gives employees at least 10 days a year for illness or personal needs. He says the policy did not cause absenteeism to increase. "Our workers understand that if they abuse the system, they'll pay out of pocket for each day they take over the limit," he says.
Increasingly, businesses appear to see the wisdom in more-flexible approaches to time off. The average number of work-life programs a company offers, such as leave for school functions and telecommuting, has increased from 9 to 11, and more companies are providing elder and on-site child-care services. It's not all a matter of accommodation, however: the survey also found that an overwhelming 97 percent of companies use disciplinary action to enforce time-off policies and rank such action as the most frequently used means of preventing abuse. — Laura DeMars
Adieu to AS2?
After two years of complaining about Accounting Standard No. 2, finance executives may finally get some relief. Last December, the Public Company Accounting Oversight Board (PCAOB) proposed repealing the much-maligned rules for auditors conducting internal-control audits. The board also voted unanimously to announce a new standard, AS5, which is open to public comment until February 26.
Critics maintained that AS2 drove auditors to go overboard (and thus ring up enormous fees) in their testing and examination of controls. The new standard aims for a more risk-based audit, in part in an effort to match the audit's scope to a given company's scale. The PCAOB now proposes that auditors be allowed to rely on previous years' audits as well as on the work of others, such as internal auditors. In addition, auditors would no longer have to sign off on management's assessment of internal controls.
"I believe the proposals we're considering today will help bring about a better alignment between the costs and benefits of the internal-control audit," said PCAOB chairman Mark Olson upon announcement of the proposed changes.
Finance executives are optimistic that the pending modification will answer a number of complaints. "I'm really encouraged," says Sharon Tetlow, CFO at Cell Genesys, a biotech firm. "I think most CFOs understand the importance of regulatory oversight, but I don't think AS2 was successful in providing that." Tetlow says the ability to use prior years' work should help reduce audit bills. She also hopes to see clearer definitions of materiality incorporated into the new standard.
"I think we all welcome some reform," says Kathy Schrock, the national Sarbanes-Oxley practice leader at executive services firm Tatum LLC. "But what will determine the effectiveness of the reform is the timeliness of the guidance." Schrock says many Tatum clients are already working on Sarbox requirements for 2007, so guidance issued prior to the end of the first quarter would give filers time to adjust accordingly.
The new standard will ultimately need approval from the Securities and Exchange Commission and may not be finalized until late this year. — Kate O'Sullivan
Not Invented Here
A seemingly mundane dispute over gas-pedal design may result in a Supreme Court decision that would invalidate patents deemed too "obvious." And that may be bad news for, among others, companies that rushed to patent E-commerce business processes such as one-click transactions.
The case, involving Canadian company KSR International and Pennsylvania-based Teleflex, hinges on whether the existing patent standard — that a design would not have been obvious to someone with ordinary skill in the art at the time of the invention — is too vague to be of value.
According to Chief Justice John Roberts, the existing federal test for obviousness is "worse than meaningless." Critics say the unclear definition leads to the granting of marginal patents for things that are not entirely original or that incorporate elements of devices or services that already exist. Such patents stifle innovation, they argue, and also make it possible for companies to game the system by acquiring intellectual-property rights to which they are not entitled.
"The purpose of the patent system is not to serve patent holders but to serve the public interest, help the economy, and provide the public with access to knowledge," says Jason Schultz, a staff attorney with the Washington, D.C.-based Electronic Frontier Foundation, which supports reworking the current standard. "The only companies that should be concerned about this potential ruling are those that have weak and suspect patents."
No one is offering a guess as to how many patents might be affected. The ruling could invalidate patents already granted, but only if a party pursues a legal challenge to a specific patent.
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