Fraud law spurs backlash, then buy-in

"Investors are actually willing to pay a premium for stocks of companies that have a governance framework in place," says Brian Cleary, marketing chief at OpenPages, a vendor of software that helps firms comply with regulations.

The new controls can give management a sharper spotlight on operations and potential problems, he says. "Some companies are actually realizing tangible benefits."

Still, foes say the costs - money and red tape - outweigh the benefits.

"In the Sarb-Ox economy, it seems that everybody audits everybody else," Alex Pollock of the conservative American Enterprise Institute wrote recently in The American Spectator.

The tab for compliance may be $6 billion for North American companies this year, according to a recent survey by AMR Research. And that's just part of an overall compliance bill, ranging from SEC regulations to Food and Drug Administration rules, that may reach $27 billion.

Lawmakers have begun hearings that may pave the way for revisions of the law, named for its architects, Sen. Paul Sarbanes (D) of Maryland and Rep. Michael Oxley (R) of Ohio. Opponents are also challenging the law in court.

Even the law's supporters concede that it won't prevent all future Enron-style debacles. But they say the costs aren't as burdensome as critics suggest. For one thing, the price tag may fall this year as companies automate compliance.

Moreover, the spinoff benefits may be significant. Of 325 executives polled by AMR Research, 75 percent said their investments in compliance procedures would support other activities.

Investor advocates, meanwhile, haven't generally climbed on the rollback bandwagon.

While the law may deter some private companies from going public, the initial public offering (IPO) is hardly dead. "If someone needs to raise capital, an IPO is still a good way to do it," says Ken Janke, chairman of the National Association of Investors Corp., which publishes BetterInvesting magazine.

In the end, compliance for many companies takes a certain toll in mere paperwork.

Ms. Requena says her team has to carry binders of reports around, gathering signatures from Micros officials. And it has to keep refining internal audit procedures.

But she says the chief financial officer led the way by deciding to embrace the changes rather than fight them. "The fact that we want to have a positive audit is a mutual goal," she says. "Now I haven't heard anybody complaining."

• CEOs & CFOs certify financial reports.

• A new regulatory body monitors the accounting industry.

• Public companies disclose more about internal controls for financial reports, insider trading, and compensation.

• Stiffer punishment for fraud.

• Executives can't get personal loans.

• Audit committees are independent of management.

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