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Sarbanes-Oxley Fuzzy Math: Section 404 hardships exaggerated by some
Excerpts from "Corporate Regulation Must Be Working -- There's a Backlash" apeearing in THE WALL STREET JOURNAL June 16, 2004.
... In complaining about over-regulation and Sarbanes-Oxley, AIG's chairman and chief executive, "Hank" Greenberg, said in a speech at his company's annual meeting that the insurer was spending almost $300 million a year on total regulatory and corporate-governance expenses. He called that "an enormous burden."
Really? That $300 million seems like a big number, but it is only about 1.5% of AIG's operating expenses, including insurance-acquisition charges last year. An AIG spokesman says of that figure, the costs from Sarbanes-Oxley were $40 million last year.
Mr. Sherin says that GE spent $30 million last year implementing Section 404 of Sarbanes-Oxley. About two-thirds of that money is spent on its own employees. "I consider that to be an investment," Mr. Sherin says.
Are the auditor costs out of control? Not exactly. According to Glass Lewis, total audit fees for 461 of the Fortune 500 companies rose 15% last year from 2002 to an average of $4.8 million. The 15% increase may sound large, but companies still managed to eke out record profit margins. These companies paid their auditors $1.3 million on average for audit-related fees pertaining to internal controls. These modest sums hardly indicate that Section 404 requirements are overwhelming.
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Copyright THE WALL STREET JOURNAL 2004
CONTENT COPYRIGHT the Wall Street Journal. THIS CONTENT IS INTENDED SOLELY FOR EDUCATIONAL PURPOSES.
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