LAWYER
LAW AND ATTORNEYS
Law, Attorneys, Corporate, Immigration, Legal Issues, Personal Injury, U.S. Goverment Resources
USA: Corporate Governance Law 'Too Strict'
Larry
Weinbach, the chief executive of Unisys, accused Congress of
overreacting yesterday when it introduced legislation following Enron
and other financial scandals.
Mr Weinbach, whose
technology company boasts annual sales of $6bn (3.3bn), joined other
executives who have recently criticised the Sarbanes-Oxley law for
imposing too many burdens on companies.
Congress
passed the Sarbanes-Oxley law in 2002 in reaction to a spate of
financial scandals, notably Enron and WorldCom, that shook public
confidence in corporate America. Sarbanes-Oxley, which called for
tighter internal company controls, caused a rethink of
corporate governance laws in the UK as well, with the
publication of the Higgs report, written by Derek Higgs, the former
investment banker.
But in the US, a corporate
backlash has been steadily building up against Sarbanes-Oxley.
Last week, the head of the New York stock exchange, John
Thain, asked in the Wall Street Journal whether regulation had gone so
far that foreign companies had decided against listing in the
US.
Mr Weinbach, who was speaking to reporters on
the sidelines of a European press briefing in the French resort town of
St-Paul-de-Vence, added his voice to the upsurge of criticism of
Sarbanes-Oxley.
"Congress was shooting from the hip
in response to mistakes some businesses made in not living up to
financial transparency," Mr Weibach said. "Congress felt it had to do
something and did not realise the full
ramifications."
The Unisys boss said parts of the
new corporate governance regime were appropriate, such as independent
directors and a compensation committee, but others were onerous and
very expensive. Others have
made the same complaint. Hank Greenberg, the chairman and chief
executive of insurance giant AIG, recently complained that his company
was spending almost $300m (£164m) - 1.5% of total operating expenses -
on total regulatory and corporate governance expenses. Mr Weinbach said
Unisys's audit fees had gone up and some of the documentation required
was "over the top".
Mr Weinbach admitted, however,
that Sarbanes-Oxley was not going to go away. "It is
expensive, some of it doesn't make sense, but we have to live with it,"
he said. But he predicted that the pendulum would swing back in the
other direction and that parts of the legislation would be modified in
two or three years.
Not everyone one believes that
Sarbanes-Oxley is imposing too high a financial and administrative
burden on corporate America. The Teamsters union recently cited figures
from Glass Lewis, the proxy advisory firm. They showed that total audit
fees for 461 of the Fortune 500 companies rose 15% last year. While the
rise seemed large, the union argued, companies still managed to report
record profit margins.
Nevertheless, some experts
believe that congressional reaction to the spate of scandals has been
over-legalistic, pointing to the advantages of the UK approach, where a
lighter touch is being applied. The UK has resisted taking a mandatory
approach and relies on an essentially voluntary system. One
change has made a significant difference in Britain. In requiring
companies to put compensation packages to a non-binding vote at annual
shareholder meetings, investors have had the chance to show their
exasperation, notably in the case of GlaxoSmithKline, the
pharmaceutical giant.
Shareholders at that
company's annual general meeting last year voted down proposed million
pound remuneration deals for executives. A revised package was approved
this year. "Sarbanes-Oxley
takes too detailed an approach," said Jonathon Story, professor of
International Political Economy at Insead, the European business school.
Revista
Brasileira de Economia - The mechanisms of corporate
...Business
Law Prof Blog: Mergers & AcquisitionsFree Articles and
Content Generator for Webmasters
alt="Lawyer">
