The corollary fact is that corporations have generally given superficial attention to these programs, calling them unduly bureaucratic and unreasonably expensive. Over the last 25 years, we have calcium sulfonate grease not only ignored the law, we have also ignored sound management practice. All of this in the guise of being "cost-effective."Sarbanes Oxley has obviously cost corporations huge amounts of money during this first year, but that is to be expected after 25 years of disregard for a well documented system of controls. In subsequent years the costs will be less, but there will still be a permanent increase in systems costs. Controls cost money and it is our own neglect that has created the need for corporate boards and managements to execute a major catch-up program.The irony is that the COSO standard may not have been the best standard to impose on the audit process, but it was there and well documented when the Audit community needed to move quickly. With all the "push back" coming from the corporate community, there may well be some modifications that will make the audit process less onerous, but COSO does provide a basis for very much the same kinds of documentation that are imbedded in the standards of documentation found in best practices systems throughout the world. Corporate America simply needs to make the best of this mandate and use it as a launch point for continuous improvement of these controls so that they become both compliant and useful to effective management processes.Just as with individual behavior, the way to get results in business is to either reward the results you seek, or to punish the results you want to eliminate. In government, more often than not, the sanction is more effective than the reward, or at least it is easier to deploy. We now have sanctions that threaten all participants in the process of establishing and evaluating the 25-year-old mandate for a system of internal controls. Those sanctions have commanded the attention of managements and boards alike; and SOX has been granted serious focus in every public company board room in America. Indeed, these standards are also spreading to non-public corporations, and even becoming a de facto standard for nonprofits as well.There is little doubt that as time passes, effectiveness and efficiency will improve and thus limit costs, but they will never go away?that is, not as long as the enforcement teeth are still sharp. The sad commentary is that in the face of softer enforcement we disregarded a mandate for 25 years, and for this we are now paying the price.Gerald Czarnecki, Chairman & CEO of the Deltennium Group, is a consultant, author and public speaker. A leading authority on corporate governance, Mr. Czarnecki conducts seminars and private boardroom sessions on Sarbanes-Oxley and the issues of governance that face boards of directors today. He also serves on the boards of directors of several large American corporations.
