Friday, September 09, 2005

Surviving Sarbanes-Oxley

Three million bucks. That's how much Alex Davern, chief financial officer at National Instruments in Austin, spent to comply with the Sarbanes-Oxley Act last year. And no, he's not happy about it. That's roughly 5% of profits, enough to lead the company--a testing and measurement business that went public in 1995--to consider sending engineering work overseas to offset costs.

What's worse, Davern says, is that complying with the internal controls rules didn't do much to enhance the company's systems or to protect shareholders. In fact, many of the issues seemed silly. National Instruments' auditors at PricewaterhouseCoopers (since replaced with Ernst & Young) charged $200 an hour to attend a closed-door financial meeting, just to prove that such a meeting took place. They collected all the keys to the company's data center to test the locks. They even reviewed building blueprints to confirm that glass windows were heat-tempered so that data could not possibly be lost. "If we lose power to our data center, it is not going to result in us filing inaccurate financial statements," Davern fumes. "Enron was not caused by a blackout." PricewaterhouseCoopers declined to discuss its former client, but Ray Beier, a partner at the firm, defends rigorous compliance, saying, "Investors want equal levels of assurance from smaller companies and larger companies."

Nonetheless, Davern's experience, and anger, is common these days. At a recent two-day roundtable convened by the Securities and Exchange Commission to field complaints, executives called politely but aggressively for change. In one Internet posting, the vitriol was expressed more bluntly: "SOX sucks."

Surviving Sarbanes-Oxley

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