Striking a balanced regulatory climate.

• Author: Hollein, Marie N.
• Position: FROM THE PRESIDENT

In late July, I was invited to testify before the House Subcommittee on Capital Markets and Government-Sponsored Enterprises on the Sarbanes-Oxley Act of 2002, which was then a few days shy of its 10th anniversary.

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Few companies have escaped the regulatory grip of Sarbanes-Oxley, and we've seen much in the way of additional--and, I'd argue, increasingly onerous--regulation of the business community in the decade since its passage.

The hearing was held to explore the impact of the law on businesses and the individuals who run them, and its impact on the U.S. economy. There is no dispute that Sarbanes-Oxley has been costly as it required many new resources to meet its many mandates. It has raised audit fees and the number of hours devoted to audits for FEI's members, the preparer community.

To assess that expense, Financial Executives Research Foundation, the research affiliate of FEI, conducts an annual Audit Fee Survey. For the year 2011, FERF found that fees for public companies continued to rise, about 5 percent on average from the prior year, to an estimated $4 million per company. Clearly, the cost of compliance continues to grow.

Cost Versus Benefits of Regulation

In spite of the increased cost, however, I'm of the opinion that overall the law has been beneficial. FEI was instrumental from the outset in helping shape new regulations that were the legislative by-product of the Enron Corp. and WorldCom Inc. scandals.

Though the vast numbers of financial executives bring honesty and integrity to their daily responsibilities, FEI spoke out for greater transparency and personal accountability on the part of executives in reporting financial numbers. We believe this has helped restore investor confidence in the capital markets.

At the same time, our members now face additional costs on a much greater scale, stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank trumps Sarbanes-Oxley in so many critical ways--not only in size (78 pages versus Dodd-Frank's more than 2,000 pages) and scope, but in the sheer number of rules affecting nonfinancial companies.

Sarbanes-Oxley required just 14 new SEC...