Survey: Has SarbOx Helped Business?
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Sarbanes-Oxley has been a pain. But has it been a pain in the neck, or the kind of pain you feel when you get a flu shot--unpleasant but therapeutic? While the early studies from academic researchers suggest SarbOx has been beneficial, CIOs and other IT executives are divided. |
"Research by finance and accounting academics strongly suggests that in its first five years of life the Sarbanes-Oxley Act has improved both the quantity and quality of corporate disclosure," University of Texas-Austin Professor Robert Prentice wrote in his CIO Insight analysis piece marking the law's fifth anniversary. "Although the studies are not unanimous and remain far from conclusive ..., they are consistent with much preexisting empirical literature ...."
We just received the results of our own poll on SarbOx, and it seems about half of CIOs begrudgingly agree that SarbOx has had benefits.
According to our survey of 111 IT executives, 55 percent agree that the business benefits of Sarbanes-Oxley Act compliance outweigh the cost and related problems. That's almost identical to what we found in 2006. We found no difference between companies that are required to comply with Sarbanes-Oxley and those that do not. Defenders of SarbOx, most notably consultants who have cleaned up by selling SarbOx-related services, have always said that Sarbanes could spur process improvements and improvements in data quality. Our respondents are probably referring to that as much or more than any benefits to the capital markets.
At the same time, 74 percent agree that the effort to comply with Sarbanes-Oxley is a significant business distraction. That's a way of saying a lot of management time and effort has been diverted from other worthy purposes by the push for compliance.
Businesspeople are famously reluctant to support regulation, unless it's to prevent their own ox from being gored. And there have long been doubts about the benefits of SarbOx. Given the mixed record, I think the SarbOx experience will only make the IT community more skeptical that regulatory burdens bring a silver lining of business benefits. And that means that companies will be less inclined to try to find such benefits in the future. It takes more than a 50/50--OK, 55/45--split to give them reason for optimism. I think my colleague Ed Cone got it right in his 2006 article "Is SOX Working": "Such massive regulation is an uncertain science, and even if it is beneficial in general, there is certainly room for improvement."
