Which Story Do You Believe About Corporate America?
It will be my pleasure to focus on the Christmas
story in the next few weeks but for those of you who follow the financial
markets, we have been hearing two different stories about the viability
of our corporate titans. The dichotomy comes into play when any confrontation takes
place about the importance of the Sarbanes Oxley Act or SOX for short.
see, many of our corporate leaders are threatening
to take their companies private so they don’t have to put up with the reporting and responsibility
requirements of SOX. In this sense they are trying to show how
weak our financial system is by bad laws. These same companies
don’t really sing the same song when they go to China or Europe
and compete for business while exuding all the bravado
of strength and power in trying to win in their various markets.
There are many detailed analyses of SOX and why it
may need to be modified in some ways. The corporate position in my view is that current
managements don’t like to have to take more personal liability
to convince investors that the financial statements for their companies
are accurate. They are unhappy to be placed in the crucible of
transparency in the post Enron/WorldCom period. Why is the quest
for truth so difficult? As companies get larger, the span of control
often weakens and top level executives are in fact
often out of touch and even more so unable to verify with certainty that
information they release about the company is indeed correct.
Proverbs 11:1-11 provides the reason that Christians
who are investors and Christian Financial Advisors should expect compliance
with SOX and even more. “The integrity of the upright guides them, but
the crookedness of the treacherous destroys them.”(v. 3)
“With his mouth the godless man would destroy his
neighbor (or shareholder), but by knowledge the righteous are delivered.”(v. 9) Publicly held
corporations have benefited by having investors place significant funds
in their business. To be held accountable for honesty and integrity
is not too much to ask. It is indeed our Biblical responsibility
to hold each other to higher standards. There is significant data
coming out that shows that since SOX was enacted, the number of write downs,
accounting changes, and charges to earnings is at a 15 year low. Which
story are you buying?
Sent December 4,
Dwight Short if you would like to receive future
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