A recent survey of corporate chief financial officers by CFO magazine found that most of corporate America’s top finance officers believe the Sarbanes-Oxley Act regulations have been a boon for attorneys and auditors and have caused "sticker shock" for companies.
Many of the CFOs surveyed said they think Congress acted too hastily in response to the corporate meltdowns of Enron, Tyco, WorldCom and others. There was little or no analysis done to measure just how much the new reporting requirements and internal controls would cost to implement, some said.
In addition, new exposure to liability mandated by the act has "put people so on edge that they're looking over their shoulders all the time to see whether they're perceived as doing the right thing, not whether they are doing the right thing," Graham Perkins, senior vice president and CFO of LCC International, told CFO magazine. “I don't think the legislators really understood all of the adverse consequences."
CFOs stated that some of the biggest miscalculations came in the area of outside attorney fees, which were predicted to be around $300 an hour, and the amount of time it would take to file the additional paperwork, estimated to be about five extra hours.
In fact, corporations are usually involved in extensive consultation with senior partners to make sure they have dotted every "i" and crossed every "t" required by Sarbanes-Oxley—to the tune of $700-$800 an hour. And, the time to prepare the extra documentation was too low "by at least a factor of 100" if not more, wrote Cary Klafter, director of corporate affairs for Intel's legal department, in a November letter to the SEC, which was reported by CFO. "We can only hope that the Commission's burden estimates are not used for any substantive governmental purpose, since they are completely incorrect."
SEC Commissioner Cynthia Glassman told CFO that the commission might entertain some changes to the legislation "if we start hearing that companies are spending a lot of money to comply but there are no apparent benefits, or if we hear there are more efficient ways to accomplish the same objectives." At this time though, she said there is no government effort going on to measure the cost assumptions that were built into the legislation. "It's a very difficult equation. The costs are explicit. There's also some distraction from running the business. But the benefits are very intangible."