CEO sign-off on financial reports is hollow exercise
By Paul Merrion
Editorial
Crain's Chicago Business
August 12, 2002
On behalf of nearly a thousand CEOs and CFOs who have to file statements under oath with the Securities and Exchange Commission by Aug. 14 certifying that their financial reports are accurate and complete, let me say what none of them can afford to voice in public: This is utter nonsense and a complete waste of time.
More than 50 of Chicago's largest publicly held companies are among 947 firms nationwide that are subject to this rule — namely, any company with more than $1.2 billion in revenues.
Presumably, the executives of smaller companies are less tempted to cook their books, or if they do, it doesn't matter enough to merit the SEC's attention.
From a legal, moral, practical or any other imaginable standpoint — except the crass motive of political expediency — these accuracy oaths deserve the same respect as the loyalty oaths of the 1950s, when government employees had to swear that they had nothing to do with the Communist Party.
We are in a witch hunt of another kind these days, but its targets are opting for damage control rather than principled resistance.
Instead of restoring confidence, this new reporting requirement has the stock market thoroughly spooked. After all, who knows what might be out there? I predict few if any bombshells, but don't be surprised if stocks stay flat on Aug. 15.
Besides, if Kenneth Lay were still running Enron Corp., does anyone doubt that he'd have signed what the SEC is requiring? Would anyone at Andersen have found the gumption to say, "Gee, Mr. Lay, maybe you should think twice about signing this?"
At the same time, how many thousands of lawyers, accountants and high-priced executives will it take to go through the rigmarole of making sure that law-abiding CEOs are doing what they always do when their companies file SEC reports? What a waste of money, not to mention the huge increase in directors' and officers' liability insurance premiums we're going to see.
I especially like the part about getting these statements notarized. Apparently, the SEC is worried some CEO might get hauled in and claim an impostor signed the documents.
The SEC could require them to be signed in blood and it wouldn't make the nation's financial reporting any more accurate.
As required by the Paperwork Reduction Act, the SEC estimates that it should take an average of about 25 hours to comply with the regulation. What a joke.
It should take five minutes, or however long it takes to find a notary in a Fortune 500 company. Otherwise, it would realistically take months for a CEO to determine "to the best of my knowledge" that all financial reports are in order.
Securities laws already prohibit the filing of false financial reports, so what is to be gained from making the CEO and CFO sign a statement saying that "to the best of my knowledge" those reports are accurate and complete?
If the SEC thinks that one more boilerplate legal document will do anything to restore investor confidence, it will be a long, long time before the Dow Jones Industrial Average hits 10,000 again.
©2002 by Crain Communications Inc. |
