So PR Week's top 150 league table has been a hot topic for the last couple of weeks. Our previous blog discussed the dubious nature of viewing the table in context. It is also important not to take the statistics at face value. Anyone on the UK that is involved in company auditing will be familiar with the Sarbanes Oxley Act 2002. Although this is an American act, named after its sponsors, Senator Paul Sarbanes and U.S. Representative Michael G Oxley, it of course has wide reaching ramifications for international business transactions and businesses with a second listing in the US. The act was intended to restore investor confidence following scandals such as were found evident at Tyco International, Adelphia, Enron, WorldCom and Peregrine Systems. To protect against inside trading and falsified accounts, the act holds CEO and CFOs strictly to account for annual reporting, risk assessment and internal auditing with hefty fines and/or a prison sentence for negligence or non-compliance.
"Consider Sarbanes-Oxley (Sox), the US legislation hastily passed after the Enron and WorldCom scandals in 2002. Sox is now thought in many quarters to have been a disaster, increasing frictional costs and bureaucracy and providing a field day for legal and accountancy firms, without changing the behaviour which causes the problems." Simon Caulkin.
Despite best intentions, the act with affects trans-Atlantic business transactions has been criticised by many, including the Turnball Review Group. It is unnecessarily costly and requires detailed auditing even at low levels. Many companies announced a move to delist from the US in a bid to avoid the 'SOX' burden, including British Airways, back in 2007. The UK gained its own act for control, The Companies Act 2004 and this took some lessons from the 'SOX' problem on board. The knock on effect however is that flotation on the US stock market became highly unattractive, many brokers heading to the London Stock Exchange, and many UK private equity companies cleaning up at the expense of others. In addition, a spaghetti junction of rules and regulations from two separate governments who regualrly trade with each other, has meant that many feel thay cannot enter their figures. Instead data has been estimated by mirroring figures from companies of a similar size, which apparently is achieved by a rigorous formula. But how sure can we be of what we are missing and are the league tables truly accurate?
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