Former SEC commissioner assesses governance, Sarbanes-Oxley.

• Author: Heffes, Ellen M.
• Position: Financial Reporting - United States. Securities and Exchange Commission

One thing an attendee to a teleconference, webcast or live conference can attest to--without worrying about regulators or paying large fees--is that the big subject at numerous events is Sarbanes-Oxley Section 404 and the slew of other financial-reporting regulations. While causing CFO heads to swim, commentary on the rationale, benefits, pitfalls, solutions, costs, etc. is coming from a variety of participants.

At one such conference this reporter attended at PepsiCo Inc. headquarters in Purchase, N.Y., in late August, a keynote speaker was former Securities and Exchange Commissioner Roderick M. Hills. Currently with the Washington, D.C., law firm of Hills & Stern, Hills served on the SEC during the Gerald Ford administration, yet he has much perspective to contribute to the dialogue--even now.

From a standpoint of one who was there during the 1970s--when the SEC presided over disclosure that literally hundreds of U.S. companies had made questionable payments to foreign officials and had, at that time, taken steps to remedy the situation--Hills described himself as "an embattled director from the trenches of corporate warfare."

At "Good Governance is Good Business," a day-long forum sponsored by Certus Software Inc. of San Jose, Calif., he addressed four questions relating to Sarbanes-Oxley: Did we need it? Does it work? Does it cost too much? And, what more is needed?

Hills conceded that he holds a "biased point of view on the subject of corporate governance." In 32 years as a director of 17 different companies, a member of 12 audit committees and chairman of 10, he noted he has participated in the termination of 10 CEOs and in the writing off of well over $5 billion dollars of assets that should not have been recorded as income.

Hills said that as time erases the sting of Enron-type scandals, a "chorus of complaints" about Sarbanes-Oxley is rising. Critics, he said, point out that while the stock market rose following disclosure of the scandals, it went down after passage of Sarbanes-Oxley, thus demonstrating that the public hasn't lost faith in the U.S. capital markets. Also, with over 10,000 publicly traded companies, a dozen or so scandals is not justification for saddling thousands of honorably run companies with the burden of such legislation. And, with Section 404 the object of most of the complaints, individual companies are spending in the tens of millions to comply.

So, was it needed? Whether it was needed, Hills said, is not...