Sarbanes-Oxley: an international perspective.

• Author: Marshall, Jeffrey
• Position: Special event - Editorial

How is the impact of the Sarbanes-Oxley Act being felt, both in the U.S. and in Europe? How are foreign registrants reacting to the new set of rules coming out of Congress and the regulatory agencies?

These questions framed a discussion held late last year in London involving: Colleen A. Sayther, president and CEO of FEI; David Watts, partner, KPMG Management Assurance Services in the United Kingdom; and William Plant, CFO, Oracle EMEA (Europe, Middle East, Asia). Oracle was the sponsor of the panel, which was moderated by Brian Gregory, ERP Director of Marketing, Oracle EMEA.

Sayther reviewed Sarbanes-Oxley's impact on FEI members and other U.S. companies, summarizing what she saw as the good, the bad and the ugly aspects of the law. Good? She pointed to the law's overall intent of restoring investor confidence, noting that "the best thing is the attention that has been placed on internal controls, and some other corporate governance issues." That, in turn, has enhanced the value of the CFO, she said, because "controls are things that finance is very good at."

Other positive features, Sayther noted, include: improved vigilance by boards of directors; requiring financial experts on audit committees; and the formation of the Public Company Accounting Oversight Board to oversee the accounting industry.

But Sarbanes-Oxley clearly has bad aspects, she said, such as the unexpected level of effort needed to comply, which has apparently inhibited corporate risk-taking. Other unhappy developments, she said, include a surge in earnings restatements and increased market dominance by the Big 4 accounting and auditing firms.

Truly ugly developments, she said, include the cost of compliance, particularly for Section 404, which covers internal controls and attestation about those controls. "The cost of being public is up, and the benefits are down," Sayther said. As a result, boards of directors are meeting more often, and directors and officers' insurance costs are skyrocketing.

Asked about the law's effects in Europe, David Watts said the initial reaction was "fairly negative," with many foreign filers looking for significant concessions. He added that Europe's "remoteness from the U.S." and the fragmented nature of foreign registrants tended to make foreign firms react more slowly.

Watts said that acceptance of the new law grew as the months went on, especially as non-American directors of U.S. corporations returned to Europe with...