Saturday, March 31, 2007

PCAOB: Board to Consider Proposing an Auditing Standard and Amendments to the Board’s Interim Standards and Issuing a Concept Release

The Public Company Accounting Oversight Board has scheduled an open meeting at 9:30 a.m., Tuesday, April 3, in the Board’s open meeting room at 1666 K St. NW, Washington, DC.

The Board will consider proposing an auditing standard, Evaluating Consistency of Financial Statements, and related amendments to the Board’s interim standards regarding the auditor’s responsibilities to evaluate and report on matters relating to the consistency of the financial statements.

The meeting is open to the public and will be webcast at www.pcaobus.org.

Board to Consider Proposing an Auditing Standard and Amendments to the Board’s Interim Standards and Issuing a Concept Release

Labels: pcaob as5 404

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SEC Slates Meeting to Bridge Gaps on 404

Acknowledging gaps between proposals by the Securities and Exchange Commission and the Public Company Accounting Oversight Board for complying with Section 404 of the Sarbanes Oxley-Act, the SEC will hold an open meeting next Wednesday to talk about how the two regulators can march in lockstep on internal controls.

"At the meeting the Commission’s staff will describe the remaining issues in aligning the proposed approaches, and those issues will then be considered by the Commission," the SEC stated in a release.

SEC Slates Meeting to Bridge Gaps on 404

Labels: sec 404 sox

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Wednesday, March 28, 2007

SEC Charges Two for Enron's Brazil Deal

The Securities and Exchange Commission has charged two former Enron lawyers for their role in the sale of a Brazilian power project to one of the company's infamous partnerships.

The SEC alleged that Jordan H. Mintz, former vice president and general counsel of Enron's global finance group, and Rex R. Rogers, former vice president and associate general counsel, of making material misrepresentations and omitting material disclosures from the company's public filings. According to the commission, the misconduct concerned Enron's 1999 sale of an interest in a troubled power project in Cuiaba, Brazil, to a related party called LJM Cayman (a.k.a. LJM1), controlled by then-chief financial officer Andrew Fastow.

SEC Charges Two for Enron's Brazil Deal

Labels: criminal charges, enron, lawyers, partnership, sec

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Monday, March 26, 2007

ISS Corporate Governance Blog: Exit Pay: Best Practices in Practice

Severance and golden parachute packages - which have been lightning rods for criticism over egregious executive pay - are likely to become even more high-profile this year. For the first time, new disclosure rules require companies to enumerate the estimated cash values of exit packages and other elements of executive pay. While the most egregious examples typically attract the most attention, the marketplace shows a range of practices - including some companies who have adopted best practices.

ISS has just release a paper titled "Best Practices in Practice," which seeks to explain the issues involved, to describe the range and prevalence of practices, and to highlight specific examples of companies that engage in best practices.

ISS Corporate Governance Blog: Exit Pay: Best Practices in Practice

Labels: best practices, lcorporate governance, severance

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Stuart Basefsky Blog: IWS Documented News Daily: - CORPORATE GOVERNANCE in LATIN AMERICA

Paper Abstract:
This paper analyzes recent trends of Latin America's institutional development regarding to investor protection. In spite of the underdevelopment of the region's financial markets, there is slow movement towards legal reforms intended to protect investors and make regional markets more attractive to investors; current inadequacies in the region's legal institution's generate high levels of ownership concentration, poor access to external equity financing, and narrow equity markets.

The evidence in this paper, based on firm-level data for six countries, shows that, like legal protection of investors, appropriate firm-level corporate governance is linked to lower costs for capital, better valuation, performance, and dividend payments across countries. Firms can compensate for their countries' legal deficiencies by distinguishing themselves through improved corporate governance practices, thus increasing transparency and limiting potential conflict between large and minority shareholders. Firms can additionally look for capital by issuing ADRs, as they have in recent years, although this practice undermines local capital markets.

In the end, firms and regulators must improve their governance structures and shareholder protections if they are to meet the improved benchmarks of developed nations brought about by Asian, European, and U.S. scandals in recent years.

Stuart Basefsky Blog: IWS Documented News Daily: - CORPORATE GOVERNANCE in LATIN AMERICA

Labels: adr, corporate governance, cost of capital, latin america, valuation

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Corporate Governance: A Modern Topic or a Necessity?

Recently there has been considerable interest in the corporate governance practices of companies, particularly since the high-profile collapses of large U.S. firms such as Enron Corporation and Worldcom. This is also happening on the background of legislative and regulatory changes, an increase in the scope of audit and other internal control and risk management activities and increased public scrutiny.

It is also becoming a very modern topic for Russian companies and Russian banks as they are entering capital markets and changing their management styles and structures. It can also be attributed to shareholders leaving the management of companies to professionals.

The question that arises is which corporate governance model will Russia adopt and which will best suit the current market conditions. Is it the liberal model that is common in Anglo-American countries that tends to give priority to the interests of shareholders or the coordinated model that one finds in continental Europe and Japan that also recognizes the interests of workers, managers, suppliers, customers, and the community?

Corporate Governance: A Modern Topic or a Necessity?

Labels: corporate governance, russia

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Middle East IPO Summit opens today

The conference this year aims to highlight the solid underlying economic conditions for initial public offerings (IPO) in 2007. After a volatile performance in 2006, which saw US$ 436 billion wiped off GCC market capitalisation, the bourses so far in 2007 have languished in bear territory adding to those losses.

During his presentation Dr. Izzat Dajani, Chief Executive of Investment and Development, Government of Ras Al Khaimah will examine the changing dynamics of regional capital markets. Should self-regulation and corporate governance be precursors to IPOs and should start-ups be allowed to go public and if so why?

Middle East IPO Summit opens today

Labels: governance, middle east

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Harvard Law Bulletin: Corporate Governance in a Global Economy

In the past five years, Harvard Law School’s corporate law scholars have accounted for nearly a third of the top 10 articles on corporate law and securities published nationwide, as ranked by an annual poll of corporate law professors around the country.

The honor reflects what faculty members are describing as an especially prolific and influential moment for corporate law at the school. “Harvard Law School has absolutely the finest business law faculty in the world right now—scholars who are engaged in pathbreaking scholarship and innovative teaching, who are also making significant contributions at the highest levels of policy-making,” says Dean Elena Kagan ’86.

“Globalization is changing American corporate and legal culture,” Kagan adds, “and all of our faculty experts, in their own ways, are at the forefront of understanding important aspects of these changes.”

Harvard Law Bulletin: Corporate Governance in a Global Economy

Labels: governance global

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German group seeks to delist from NYSE

SGL Group, one of the world's biggest makers of graphite and carbon fibre materials, has become the first German company to seek a delisting from the New York Stock Exchange in an attempt to cut costs.

The German Institute of Public Companies (DAI) said the strict auditing demanded by the US Sarbanes-Oxley Act has led some of the 14 German groups with secondary listings in the US to reconsider their position.

But SGL's move looked unlikely to lead to an exodus of stocks such as insurer Allianz or drug maker Bayer, because only one of them – chemicals group Altana – admitted looking at following suit.

SGL followed DaimlerChrysler to become the second German group with a secondary listing in the US 11 years ago. It says it has spent €3m on US compliance.

German group seeks to delist from NYSE

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Saturday, March 24, 2007

Foreign firms' deregistration rules eased

Foreign firms' deregistration rules eased

Labels: foreign filer, registration, sec

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Judge Dismisses Sarbanes-Oxley Lawsuit

A lobbyist for big business on Wednesday vowed to continue challenging the constitutionality of a 2002 anti-fraud law after a federal judge dismissed a lawsuit the group brought against the independent board Congress created to oversee the accounting industry.

The Free Enterprise Fund, which filed the suit in February 2006, argued that the Public Company Accounting Oversight Board violates the Constitution's mandated separation of powers among the three federal branches because its five members are not appointed by the president, cannot be removed by him and Congress does not control the board's budget.

But U.S. District Court Judge James Robertson wrote in a 14-page opinion that granted summary judgment in favor of the board that "the plaintiffs have brought a facial challenge to the PCAOB, presenting nothing but an hypothetical scenario of an overzealous or rogue PCAOB investigator."

Kenneth W. Starr, co-counsel for the lobbying group, said in a press release "we will continue to press our important cause in the Court of Appeals and the Supreme Court."

Judge Dismisses Sarbanes-Oxley Lawsuit

Labels: PCAOB lawsuit

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SEC Censures AMEX for Lax Controls

The Securities and Exchange Commission censured the American Stock Exchange for failing to enforce compliance with securities laws and rules and failing to comply with its record-keeping obligations. In addition, the SEC instituted administrative proceedings against Salvatore F. Sodano, the Amex's former chairman and chief executive officer, for allegedly failing to enforce compliance with the same laws and rules.

The Commission elaborated that from at least 1999, the Amex has been warned that its surveillance, investigatory, and enforcement programs were inadequate. The regulator noted that the Amex previously agreed to the issuance of a September 11, 2000 order that, in part, directed the exchange to enhance and improve its regulatory programs. Even so, the Amex's surveillance programs for options order handling continued to be inadequate, said the charge.

SEC Censures AMEX for Lax Controls

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Tuesday, March 20, 2007

Russia Blog: Russian IPOs - Curb Your Enthusiasm?

Improving Corporate Governance in Russia

Another recently released report that attracted comment in the Russian press this week was issued by the international headhunting firm Heidrick & Struggles. It notes that the Russian companies floating on international stock exchanges raise 20% less than their Western counterparts because Russia’s standards for corporate governance are lower. It also shows that investors would pay up to 38% more for shares in Russian companies with good corporate governance. This is a very good argument for the Russian entities engaged in corporate governance, like Russian Institute of Directors or the Institute of Corporate Law and Corporate Governance.

Russia Blog: Russian IPOs - Curb Your Enthusiasm?

Labels: governance, ipo, russia

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Forum looks into developing framework, models for corporate governance, corporate responsibility

Corporate governance and social responsibility is in need of updated regulations and faces major obstacles according to the organisers of a new forum held on Tuesday at the Dead Sea Movenpick Hotel.

The forum, intended to bring together business leaders from across the Middle East and North Africa region (MENA), was designed to launch Schema, the first privately held Corporate Governance and Responsibility advisory practice in the region.

Majied Qasem, chairman of Schema, evoked the example of the Dutch East India Company, the first multinational corporation in the world and the first company to issue stock, as an example as why the local public sector should become more involved with the corporate governance movement. The company, after 200 years of profit, became bankrupt due to poor governance.

"We want to remind people that corporate social responsibility [CSR] isn't a new concept. Theses concepts are as old as corporations themselves," said Qasem. "I am sharing this example to raise the level of awareness and urgency. These problems cannot be solved by governments alone, we need the business sector to step up."

Forum looks into developing framework, models for corporate governance, corporate responsibility

Labels: africa, development, governance

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CalPERS criticizes 11 firms over corporate governance

It's not quite true that nobody doesn't like Sara Lee -- or at least the company's stock performance and corporate governance practices. The food giant has run afoul of the nation's largest public pension fund.

So have Eli Lilly, insurance broker Marsh & McLennan and eight other companies.

In its annual list of corporate laggards, the California Public Employees' Retirement System on Thursday cast a wide net this year.

The activist fund chided the public companies for underperforming their industry rivals on Wall Street, having entrenched corporate boards or refusing to adopt practices that give shareholders more sway.

"It's time for these 11 companies on the list to step up to the plate, be accountable and face their shareowners. They have some of the worst governance practices in corporate America," said Rob Feckner, CalPERs board president, during a conference call Thursday. "Good governance helps the bottom line."

CalPERS criticizes 11 firms over corporate governance

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Queen's School of Business Launches Canada's First Research-Focused Centre for Governance

Queen's School of Business (QSB) today launched the CA-Queen's Centre for Governance, a new initiative funded by the Institute of Chartered Accountants of Ontario to improve corporate governance in Canada through a variety of research and teaching programs. The Centre is the first in Canada to have as its primary mission research in the area of governance.

"The CA-Queen's Centre for Governance is another example of how Queen's School of Business is adding value to today's corporate environment," said David Saunders, Dean, Queen's School of Business. "With our partners at the Institute, we look forward to raising the bar on corporate governance research and its implications for education in Canada."

The Centre will fund Queen's faculty and doctoral student research into Canadian and international corporate governance issues, especially those which relate to audit committees and financial reporting. The first research funded explores the state of internal controls at Canadian public companies, led by Queen's Professor Steve Salterio, the Centre's Academic Director, and Regan Schmidt, Queen's PhD candidate. Preliminary results from this research reported last fall showed that 19 per cent of Canadian companies have been identified as having such deficiencies, underscoring the importance of the Centre's mandate.

Queen's School of Business Launches Canada's First Research-Focused Centre for Governance

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Keep Sarbanes-Oxley

The Bush administration — with the vocal support of business interests — is arguing that the time is right to loosen some of the requirements of the Sarbanes-Oxley corporate reform law, passed after the scandals at Enron and WorldCom. But if anyone doubts that these reforms, designed to increase accuracy and accountability, are necessary, consider this: According to the research firm Glass Lewis, nearly 10 percent of companies listed on exchanges in the United States refiled their financial statements last year after finding mistakes.

In those cases investors were making decisions based on incorrect information, and some executives were being paid for results they didn't achieve. These are often more than small bookkeeping errors. Last week, General Motors restated five years of financial results. In its annual report, the company warned that the lack of effective internal controls "could adversely affect our financial condition and ability to carry out our strategic business plan."

Internal controls are the methods that companies use to ensure that their financial statements are accurate, like reconciling cash on a company's books with its actual bank statements or running built-in software checks of accounts. They include such simple steps as having a code of ethics and determining whether the company has sufficient accounting staff.

Keep Sarbanes-Oxley

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Sarbanes-Oxley is in Congress’ cross hairs

Public companies with market capitalizations of less than $700 million would be allowed to comply with Sarbanes-Oxley on a voluntary basis under legislation introduced last week by Sen. Jim DeMint, R-S.C., and Reps. Tom Feeney, R-Fla., and Greg Meeks, D-N.Y.

The Competitive and Open Markets that Protect and Enhance the Treatment of Entrepreneurs Act first was introduced last year.

The Sarbanes-Oxley Act was enacted in 2002 after corporate scandals erupted over company accounting practices. Many businesses have complained that the law is too costly and burdensome, and several studies released in recent months have said that it is partly to blame for a loss of U.S. competitiveness in global financial markets.

Sarbanes-Oxley is in Congress’ cross hairs

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Saturday, March 17, 2007

SEC chief rejects easing of Sarbanes-Oxley rules

Christopher Cox, chairman of the Securities and Exchange Commission, on Wednesday rebuffed a call from America's largest business lobby that Sarbanes-Oxley be changed to allow the regulator to ease the burden of complying with the law.

His comments came a day after the US Chamber of Commerce made the recommendation as part of a six-point plan to address perceptions that the US risks losing its global pre-eminence in the capital markets.

It also came as divisions emerged on whether the US capital markets were suffering from the effects of Sarbox and the US legal environment, among factors blamed in recent high-level reports for a declining US share of company listings.

The chamber's report said Sarbox should be incorporated into the landmark 1934 federal securities act to give the SEC clearer authority to issue rules and make exemptions on important aspects of Sarbox.

SEC chief rejects easing of Sarbanes-Oxley rules

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Not All Filers Are Accelerated Equal

Large accelerated filers — U.S. companies with a market capitalization of at least $700 million — have struggled to meet a new Securities and Exchange Commission filing deadline, according to institutional research firm Glass, Lewis.

Beginning this year, these companies must file their annual report with the SEC within 60 days after their fiscal year-end, 15 days earlier than under the previous deadline.

Glass, Lewis found that of the roughly 1,300 large accelerated filers with a calendar year-end, 81 did not file by March 1; last year, only 55 companies requested more time.

Not All Filers Are Accelerated Equal

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Friday, March 09, 2007

SOX Work spurs Professional Passion - "More than a Living"

In my risk and control work - both inside companies and more recently as a consultant - I continue to be challenged by personnel that are idling in place. No interest in moving up, no interest in moving on, no interest in getting on board with the changes at hand.

This has been hard - for everyone. Employers would prefer that competent people stay in their current seats (less risky, as such people achieve a level of "proficiency" over time at their work).

But what happens when the landscape changes, and the requirements of Mr. Retired-at-Work necssitate that they grow and adapt and - gasp - do more than they have for the last 10 years?

If managers don't manage, others must pick up the slack. And this is where my control work has kicked off a new passion -

Slackers and weak managers jeopardize both the value of the company and the careers of professionals that have passion for their work.

SOX Work spurs Professional Passion - "More than a Living"

Labels: more than a living, passion, value

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More than a Living Blog: Dear Newbie - Risk Management Rules for your Budding Career

Inherent in every conversation I’ve every had about change - aging, career shifts, marriage, parenting, promotions - is a greater or lesser concern over the risks that come with something new. Ah, FUD. It’s not that we don’t want to change and grow, just that it comes with so much fear, uncertainty and doubt.

Since “Buck up Little Camper, It will work itself out!” seems trite, I thought I’d share this instead. I came across this great list originally from RiskMetrics Group, and thought, “Isn’t this of interest for all considerations of risk?” (Obviously, my answer was yes.)

• There is no return without risk. Rewards go to those who take risks.
• Be transparent. Risk should be fully understood.
• Seek experience. Risk is measured and managed by people, not mathematical models.
• Know what you don’t know. Question the assumptions you make.
• Communicate. Risk should be discussed openly.
• Diversify. Multiple risks will produce more consistent rewards.
• Show discipline. A consistent and rigorous approach will beat a constantly changing strategy.
• Use common sense. It is better to be approximately right, than to be precisely wrong.
• Return is only half the equation. Decisions should be made only by considering the risk and return of possibilities.

More than a Living Blog: Dear Newbie - Risk Management Rules for your Budding Career

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SOX Life Blog: Investor Valuation of Governance

Dan Swanson's listserv recently passed a link to the ICAEW, providing discussion on "what is governance?" and "why is it important?"

Most notably in this piece, this McKinsey quote struck me:

There is evidence that investors value companies with good corporate governance. McKinsey surveyed over 200 institutional investors and found that 80% of respondents would pay a premium for well-governed companies, from 11% in Canada to 40% in Egypt (Global Investor Opinion Survey, 2002).

SOX Life Blog: Investor Valuation of Governance

Labels: invest, risk premium, value

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