Sarbox Peels Back The Onion

On a mission to make everyone in corporate America a Boy Scout, the Sarbanes-Oxley Act is now five years young and, for all intents, seems to be having the desired effect, according to one of its architects.
While some in the business community have ranted and raved about what was once a compliance debacle, the new regulatory environment is now becoming business as usual.
So where's it headed?
Michael Oxley, co-author of the controversial piece of legislation and a former U.S. congressman, discussed the law, commonly referred to as "Sox" or "Sarbox," at the third annual Gartner Financial Services Technology Summit in New York City. Oxley is the vice chairman of the Nasdaq.
He talked about the birth of Sarbox and the fact that corporate leaders at all levels now have a greater understanding of its purpose, not just in the U.S. but in countries in Europe and Asia as well.
The law was adopted in July 2002 to create "transparency and accountability," Oxley said. Following the Enron collapse in late 2001, Paul Sarbanes, a former Democratic U.S. senator, and Oxley, a Republican, drafted a bill that was intended to protect anyone with a vested interest in a public company--from employees to investors--from corporate corruption. Other widely publicized scandals at the time included those at WorldCom and Tyco International (nyse: TYC - news - people ).
"We tried to peel back the onion as best we could," Oxley said.
He said one consideration was the proportion of American households investing in public companies today, compared with 25 years ago. Oxley noted that in 1981 about 36% of households invested in the stock market. That number has shot up to 54%. Regardless, some contend that few investors even know this law has got their back, so to speak.
Oxley also said companies in Japan and China are now making the required investment to adopt these measures.
The amount of time Sanjay Anand, chairman of the Sarbanes-Oxley Institute, an independent consulting group, has spent abroad speaks to that. Anand serves as a consultant for companies seeking compliance guidance. He had said he spent 80% to 90% of his time consulting in a foreign country in 2006.
Oxley said that initially the law was "far too bureaucratic" and has since been ironed out by the U.S. Securities and Exchange Commission and the Public Company Oversight Accounting Board, which was created by Sarbox.
This compliance comes at a cost, one that few companies were fond of paying. That, Oxley admitted, was a misstep on the government's part. Companies thought they would have to spend only about $100,000 to comply with Section 404 of the law, which involves tighter auditing requirements.
"The estimates of cost were undeniably low," Oxley said.
According to Financial Executive International, a nonprofit advocacy group and research firm, companies with a market capitalization above $75 million spent an average of $2.9 million on Section 404 compliance in 2006.

http://www.forbes.com/leadership/governance/2007/08/27/sarbox-regulation-rules-lead-govern-cx_mk_0827oxley.html