LETTERS
Accounting
The much-heralded corporate and accounting reform act signed into law at the end of July by President Bush has its drawbacks. One of the biggest in my mind is the fact that its rather onerous requirements may scare away from public ownership up-and-coming private companies that could be the next Microsoft or Broadcom.
The law is very comprehensive in addressing issues ranging from corporate governance and accountability, enhanced disclosures, oversight of public accounting firms, and stricter penalties for those who break or abuse the regulations intended to keep business honest.
Set against the business excesses of the 1990s, the law has undoubtedly sent a strong message to corporate America that the conduct we have seen from leaders at companies such as Enron and Worldcom will no longer be tolerated.
However, the new law will certainly mean higher costs for corporate necessities such as insurance premiums and audit fees, as well as other expenses related to corporate governance. Similarly, with the introduction of the Public Company Accounting Oversight Board, smaller public accounting firms may no longer wish to practice in this area, leaving it solely to the larger firms that will be able to pick and choose their clients and charge whatever they want.
The legislation will almost certainly slow the pace of small, emerging private companies venturing out into the public marketplace, and will cause smaller public companies to question whether they really want to be, or can afford to be, a public company. Without question, the requirement that CEOs and CFOs affix their signature , and reputation , to their public company’s financial statements, will make the owners of private companies think twice about going public.
It will be interesting to see, once our equity markets and economy are more receptive to new stock offerings, if the law has cast a shadow over that extremely important aspect of our country’s business enterprise.
On the other hand, I strongly support the requirement governing the makeup of boards of directors and audit committees. In this new climate of accountability, board members will need to become more attentive, deliberative and independent than ever.
While the jury is still out on the full impact the new reform act will have on the nation’s business climate and day-to-day operations, in the final analysis I believe these tougher rules will make our corporations more honest, our capital markets more trusting, and our investors more confident.
Rick Smetanka
Partner, Haskell & White LLP
Irvine
Deep Thoughts On the Angels
& #149; Let’s not forget to thank Mo Vaughn for so graciously going to New York. Without him the Angels went from last to the league championships and the Mets went from first to last.
& #149; Ditto for Tony Tavares. Maybe there is hope for the Ducks.
& #149; Rally Sticks have replaced Swizzle Sticks as OC’s favorite way to stir.
& #149; What about the Dodgers? Oh, you mean that other Orange County-area ballteam?
& #149; Remember the Rams. In spite of their O-fer early season there is no truth to the rumor that Georgia is moving the team back to Anaheim.
Dr. Mike Glueck
Numb in Newport
