Enron Convictions

Lay and Skilling were convicted today. That's basically good news to me - you shouldn't be able to destroy billions of dollars of value through fraudulent accounting practices and just walk away. But I bet those guys are living in a state of disbelief that things you do at work, at a corporation, can put you in prison for decades. I know I would be.

I purposely do not mention the name of the company I work for on this blog, but I sometimes feel as though our president forgets that he does not actually own the company - that the company is owned by the investors who have bought our stock. I don't see any fraud going on or anything like that, and I know he's completely dedicated to making the company a success (not least because he owns a lot of stock himself, naturally), so I guess what I'm talking about is just an attitude.

Right now we are going through the process of becoming compliant with Sarbanes-Oxley. Sarbanes-Oxley, or SOX as it is commonly called, became law (or regulation, or whatever it is exactly) basically because of Enron and the other scandals. It's a very rigorous (read: costly and burdensome) set of rules that basically say that, for everything you do that affects accounting or financial reporting, you have to have defined procedures and very specific controls. This only applies to publically traded companies. But the penalties for falsely claiming to be SOX-compliant are severe. (If you are not SOX compliant within something like a year of being publically traded, you face penalties like being de-listed. But once you claim to be compliant, this is tested in your yearly audit, and if you are not following the procedures you claim to be following, very bad things happen.)

Many people here, including my immediate boss, have a bad attitude towards SOX, seeing it as a total waste of time and resources. It seems generally acknowledged that SOX is overly burdensome, but it's hard for me to be totally negative about something that should, in theory, make it harder for companies to have the kind of loose accounting standards that defraud investors. I also don't see how the bad attitude is helpful - we have to do it, so we might as well approach it as though it might be helpful. (But ask me again in six months.)