As Goes SOX?
May 31, 2007 | Filed Under Technology, Compliance
The financial gravy train ridden by auditing firms due to Sarbanes-Oxley compliance may be slowing down a bit.
ComputerWorld reports that average SOX compliance costs declined from $4.5 million in 2004 to $2.9 million in 2006. The main reason is not a surprise:
“Technology has a lot to do with the cost reduction,” said Sanjay Anand, chairperson of the Sarbanes-Oxley Institute. Public companies “are actually automating their controls. A good 20 to 30%, even as much 40%, of the cost reduction is actually coming from automated controls rather than manual controls.”
(A clear sign that SOX may be a bit over the top is that it has spawned its own institute.)
The experience that companies gained in automating processes due to Sarbanes-Oxley may now be extended to other areas of the enterprise. Lawyers know that a good deal of what constitutes ongoing legal services could be automated, or a least tracked better from a technology standpoint in the first instance.
That’s the start of any process improvement. Almost like magic, or like just adding water.
Update (1 June 07): One CEO writes in the Wall Street Journal that he doesn’t see Sarbox-related costs going down.
One Way to Deal With Corruption
May 29, 2007 | Filed Under Criminal Liability, In the News
The New York Times reports that China’s former top food and drug regulator has been found guilty of accepting bribes.
The sentence: death.
While possibly intended to signal how seriously the Chinese government takes the problem of adulterated food or counterfeit drugs, it may send a mixed message to the global marketplace.
HP, the SEC, and Reliance on Counsel
May 24, 2007 | Filed Under Litigation, Compliance, Governance
The SEC confirmed yesterday that HP would not face sanctions over a failure to explain why director Thomas Perkins left during last year’s Dunn-director investigation saga.
“From the whole hubbub that erupted last summer, this is it” in terms of SEC enforcement, said Marc Fagel, associate regional director for the SEC in San Francisco. “We view the issue as a narrow one, which is, what is a company’s responsibility when a director resigns.”
It is unusual, in my experience, for a regulator to use the word “hubbub.” Sort of hard to press charges over hubbubs.
The SEC’s decision was explained thusly:
“It was a new rule and (HP) relied on their attorneys,” Fagel said. “They got legal advice from inside and outside counsel that they did not need to make the disclosure. You need to be careful how you sanction a company that relied on its counsel.”
“You need to be careful how you sanction a company that relied on its counsel.”
Ah, music to the ears of SEC partners everywhere. And a standard that regulators of various stripes should consider.
That said, will inside counsel make such a call in the future without an outside opinion? Are they covered (insurance, indemnity or otherwise) if they do and they are wrong?
While HP still faces related shareholder litigation, this is definitely a positive development for new HP GC Michael Holston.
The World Bank Ex-GC Speaks
May 21, 2007 | Filed Under Investigations, Governance, In the News
Corporate Counsel’s David Hechler offers a fascinating glimpse into a GC’s view of events in the news. Mr. Hechler reports on the legal maneuverings behind Paul Wolfowitz’s fall from grace at the World Bank, with insights from Roberto Dañino, the bank’s former GC. This account provides a welcome counterpoint to some opinion pieces, such as this one from the Wall Street Journal.
Mr. Wolfowitz, as Wired GC readers undoubtedly know, resigned last week as president of the World Bank over concerns about his handling of the transfer of his girlfriend from the bank to the State Department. As the president of anything, you normally don’t want any personal ethical problem in the news, let alone one that involves your “girlfriend.”
Anyway, at various times in the review of this delicate situation, Mr. Wolfowitz reportedly consulted Mr. Dañino, utilized personal counsel, and then went to outside counsel when Mr. Dañino was “conflicted.” These actions didn’t make sense to the then-GC:
Dañino says he’s baffled by this decision. “How [could Wolfowitz] make a call about conflicting out the lawyer of the bank, who happened to have also given advice that he didn’t like?” Also, he adds, the rationale in the adviser’s memo made no sense. Not only was Wolfowitz represented by his own lawyers, “the general counsel is not the personal lawyer of the president,” Dañino says. “The general counsel is the lawyer for the institution.”
Mr. Dañino was allegedly not shown the terms of the employment contract for Mr. Wolfowitz’s girlfriend that may have contained terms more generous than those approved by the bank’s ethics committee. Experienced GCs know that outcomes can sometimes be “managed” by corporate personnel based upon the extent of disclosure of key documents and whether direct contact is allowed with key actors in real time.
My favorite remark from Mr. Dañino:
“I tell my children all the time: When you make a mistake, it’s not so much the mistake you make [that counts], but how you react to your mistake…”
General Counsel rarely speak with the press; rarer still are comments about the inside doings of events in the public spotlight. Two cheers for Mr. Dañino for allowing a look behind the veil; three cheers for Mr. Hechler for going well beneath the surface in his excellent and timely reporting.
This is News?
May 17, 2007 | Filed Under Litigation, Law Firm Trends
There’s a lot out there on the web, and not all of it is as it seems.
Take, for example, this “article” which appears to report on issues that major medical device company is facing over a prominent division.
What looks at first blush like news is actually an invitation to contact a plaintiffs’ attorney if you look at the link at the bottom of the page. Other signs include the fact that the “About” page has no identified editors or staff (but a fetching picture of a very earthy group in the wild), and the site’s FAQs are all about class actions.
It’s probably advisable to Google your company from time to time and see what you get. All the news that fits may not be news at all.
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