J-SOX Nation

This past April, Japanese pitching sensation Daisuke Matsuzaka wowed Red Sox Nation with his "gyroball." From now until next April, Dave Sackett expects to be equally mesmerized by Japan's version of the corporate curveball.

The corporate controller of Ulvac Technologies is charged with implementing J-SOX — the Japanese edition of the Sarbanes-Oxley Act (sometimes abbreviated as SOX). The process is a "huge deal" at the Methuen, Mass.-based subsidiary of Ulvac Inc. of Japan because the private firm (the parent is public) has never thought much about documenting internal controls or formalizing its audit trail. "Our reporting has been kind of loose in the past, but now we need to document everything," Sackett says.

Sound familiar? Following the lead of the U.S. standard setters, Japan passed a slightly less onerous version of Sarbox in June 2006 in response to its own corporate- accounting scandals. Now, working with auditors from Oishi & Co. of California, Sackett is instituting procedures such as linking employee hours to products by work order, creating a signature- authorization document for expenses, and installing a J-SOX-compliant ERP system.

While Sackett has never implemented Sarbox regulations before, "I followed them closely, because I knew we'd be mimicking the internal controls and checklists," he says. Natasha Nelson, chief ethics and compliance officer at Daiichi Sankyo Inc. in Parsippany, N.J., however, went one step further. She spent the past two years watching her fellow pharmaceutical companies implement Sarbox. With the support of company executives in Japan, she rolled out a strong whistleblower program, hired staff with Sarbox experience, and even test audited a process. She learned not to overdocument, she says, and to attend lots and lots of seminars "to get the credentials we need to fully understand all the aspects of Sarbox."

Both companies are further along in preparing for J-SOX than most, says Paul Sachs, managing director of the Los Angeles office of Protiviti Inc. Too many U.S. subsidiaries of Japanese companies are waiting for directives from the head office rather than finding their own resources to help with J-SOX compliance, he observes. But all of them must be compliant by March 2009. And like his American counterparts, Sackett hopes there will be positives that come from the process. "It's like medicine," he says. "It tastes bad going down, but you know it's really good for you."