Report card on Sarbanes-Oxley: one year later.

• Author: Sayther, Colleen
• Position: President's Page

Over one year has passed since President Bush signed the Sarbanes-Oxley Act into law, and its impact has been enormous.

First, the positives:

* Although it can be argued that there is nothing really new in Sarbanes-Oxley, it was a sorely needed initiative designed to focus senior management on corporate governance, transparency and doing the right thing. As such, FEI was an early supporter. Congress needed to take a decisive and unflinching stand against the ethical scandals that had rocked the corporate world. The Act did that. However, many of its explicit provisions were implicitly in place beforehand, such as executives taking responsibility for their company's financial statements.

* Visible legislation and ongoing prosecution have focused management and boards of directors on behavior that will restore investor confidence in our financial markets.

* Sarbanes-Oxley has enhanced the value and stature of the CFO, elevating the basic tenets of our profession, such as internal controls, to a new level of importance. The true weight of the CFO role on business strategy, investor confidence and, ultimately, the success of the entire company, is better understood.

* The code of ethics requirement is critical, and one FEI played a significant part in developing. All meaningful attempts at reform must begin with a sworn commitment to ethical values.

* Requiring a financial expert on boards has raised the bar, and will have a profound impact over time.

* Creation of the PCAOB is a welcome alternative to a self-regulatory structure, and its visibility helps restore investor confidence.

* The law's aggressive stance against ethical wrongdoing has helped restore U.S. leadership in the fight against corruption and making the American system a model for other countries. It was never the U.S. accounting system that was at fault, but rather individuals seeking to circumvent existing standards for their own ends. Sarbanes-Oxley helps ensure they can no longer do that.

We find, however, significant--and perhaps unintended--consequences of the law and its interpretation that may not be in the spirit of the original legislation.

* Costs for compliance are excessive. The compliance effort required is beyond what anyone expected, and creates a significant burden. Audit fees, legal fees and D&O insurance premiums are rising, affecting every public company's bottom line. When FEI surveyed our members last May relative only to Section 404, average expectations...