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Sarbanes-Oxley wasn't supposed to make CFOs' jobs "more satisfying," writes a reader. More letters to the editor: the immigration debate rages on; improving COSO; why the Big Four aren't necessarily better; worksite wellness.
CFO Staff, CFO Magazine
May 8, 2006
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I have read "A Tough Act to Follow" (March), and I have to say, Sarbox didn't happen because everything was OK. It wasn't!
Until we find out if the company owners can understand and accurately gauge the health of their business (please don't forget, they own it), we won't know if anything needs to be "fixed." If they can, and if there are no more Enron-style surprises for a few years, and if earnings don't have to be restated for more than two or three public companies per year, then it will be time to look at optimizing Sarbox, not repealing major chunks of it.
I don't recall that making CFOs' jobs "more satisfying" or "reducing workload" was the purpose of Sarbox. Maybe earning the $2.6 million median total direct compensation for CFOs and $7.4 million for CEOs should have been the goal, because it will certainly be a byproduct.
So, stop whining and get back to work, or we'll change the ratio to a paltry 400:1.
The Question of Foreign Workers
What stuck with me on the first page of "Help Wanted" (March) was the phrase "[the] need for foreign-born workers." I thought the need was for qualified workers, without consideration of other demographics.
If the Army no longer trains welders, then private companies can choose to train their own or run the risk of hiring people with false credentials.
The phrase "The devil made me do it" retired along with Flip Wilson and his TV show in the 1970s. Explaining bad behavior should not be the same as condoning it.
Let me see if I get this straight: Ingersoll Rand, a company headquartered in Bermuda to avoid expenses by stiffing the government for federal taxes (as do Accenture, Tyco, and so on), is distraught that there were not enough skilled welders available to get their contracted work done on time. This smacks of a convicted bank robber complaining about not being able to open a checking account.
The obvious question posed by the piece is, Why aren't enough young people getting the skills claimed to be necessary? — in this instance, welding. The answer might be because they perceive little long-term benefit. Why would someone take the risks to acquire the skills, only to be laid off by companies like Ingersoll Rand that look only to the bottom line?
The employer-employee relationship is a two-way street; today's youth watched as the preceding generation(s) suffered layoffs and reengineering ad nauseam. Who, other than myopic top executives, can blame them for finding career paths that they enjoy on levels other than job security? Welding was never glamorous or easy, but decades ago many (mostly) men took it up knowing that they would be able to feed their families and take annual vacations for many years going forward. Sure, some may have enjoyed the work for its own sake, but I daresay that was a small minority.
In the current climate of megamergers and downsizing, one cannot fault today's students for concerning themselves with career paths that they deem more promising on a long-term basis.
Third Wave International
Van Nuys, California
Not a Competition
In your article "The Trouble with COSO" (March), you reference the Institute of Management Accountants's [conference] at which we would preview a management and risk-centric controls assessment model, CARD-ME, described in the article as a "rival" framework to the Treadway Commission's Committee of Sponsoring Organizations (COSO). You also cite a source that indicates that IMA canceled the event due to government regulators refusing to attend the conference, since they didn't want to appear to endorse a rival system.
Actually, we canceled it simply because we determined that there were more-effective means to convey our initiatives than via a small conference engineered for, at most, 100 participants. In fact, IMA has received tremendous support since the announcement of its Sarbox initiatives last December.
As a member of the COSO board since inception, I'd like to clarify that IMA is not trying to compete with the existing core framework. IMA is simply trying to take the COSO 1992 framework to the next level. We firmly believe that our initiatives will enable more cost-effective Sarbox compliance for companies of all sizes.
Vice President, Research & Applications Development
Institute of Management Accountants
Big Four Bias
Your article "Cushioning the Blow" (Topline, February) provides visibility to an Indiana University study that implies negative financial news, such as disclosure of internal control weaknesses, will have a less severe impact on a business's stock price if the company uses a Big Four auditor. The reason, according to the study, is that the largest firms are deemed to provide the better-quality service. This premise, that the Big Four equals quality, is biased and based on a 15-year-old study whose authors acknowledge that such "perceived" quality may not be accurate. This renders the current findings of the Indiana study highly questionable.
There is a long list of factors that may be considered by investors making buy-sell decisions after the disclosure of financial news. We believe a "rational investor" focuses on the nature of the violation being reported and on previously existing market perceptions (or lack thereof) of the business reporting the weakness. On average, non-Big Four audit clients are smaller and are not "followed" as closely by analysts and media as Big Four clients. Therefore, disclosure of information by these smaller entities, whether the information be of a positive or negative nature, may have a more dramatic effect on stock price than similar disclosures by the more closely followed companies.
Interestingly, the Indiana University study states that "recent accounting scandals have led to increased interest into the determinants and consequences of low financial-reporting quality." The authors may want to look into who the auditors were in those scandals before they begin equating quality with size.
National SEC director
BDO Seidman LLP
Along with running my own company, I am an American Cancer Society volunteer chairing an employer/employee constituent group ("Putting a Premium on Health," CFO's Human Capital Special Issue). Savvy CFOs would do well to look into the ACS's menu of worksite wellness programs. While free, they can be co-branded and work in harmony with existing programs.