Most investors applaud recently instituted reforms intended to prevent corporate abuse, however they express deep reservations about the costs to implement them, according to a poll of institutional investors conducted in February by Broadgate Consultants LLC.

In addition, with bonuses soaring for CEOs at the nation's top corporations, investors also believe that transparency surrounding executive compensation is not sufficient and should be improved.

An overwhelming majority (83%) of the 105 institutional analysts and portfolio managers from across the U.S. responding to the survey, which covered a range of capital markets issues, say that the new rules relating to auditor testing and certification of companies' internal financial controls, required under Section 404 of the Sarbanes-Oxley Act of 2002, should be modified to make compliance more cost-effective.

So-called Section 404 requirements now apply to approximately 4,000 public companies that have at least $75 million of publicly-held securities. A number of company executives have claimed that certifying internal financial controls as required under Section 404 is becoming a costly and time-consuming burden and institutional investors appear to agree, particularly with the explosion of delayed earnings announcements attributed to Section 404 compliance.

Survey respondents were not on the same side of the fence with corporate executives on the topic of compensation disclosure, however. Nearly 90% of the fund managers surveyed strongly advocate more transparency about executive pay. With studies showing CEO bonuses at record high levels, nearly two-thirds of the Broadgate survey respondents say most companies have not adjusted their compensation policies in response to the claims of executive
excess.

A continuing sore spot for investors is the quality and independence of opinions rendered by the investment banking community. For example, 80% of respondents believe that regulators should bar investment banks from issuing fairness opinions on transactions in which they stand to benefit financially.

When it comes to offering advice regarding which stocks to buy and sell, 60% of the investors surveyed say that broker analyst coverage is a less important factor in their decision-making today than two or three years ago.

"Institutional investors appear to be taking a much more pragmatic stance about recently enacted reforms such as Section 404 of the Sarbanes-Oxley Act," said Thomas C. Franco, Chief Executive Officer of Broadgate. "They are demanding cost-effective reform and are focused on selected hot spots, such as executive compensation, where the strong perception is that more work needs to be done."