Corporate Reforms Reassessed

Nearly two years after Congress passed corporate reform legislation, the law still gets enthusiastic public reviews from chief executives. But behind the scenes, there is growing pressure to scale back some of its provisions.

At a hearing yesterday to mark the July 30 anniversary of the Sarbanes-Oxley Act, lawmakers and corporate officials raised the prospect of reopening debate as soon as next year on the part of the law that requires companies to assess how well their internal financial controls work, a provision that a study by Financial Executives International said cost some large companies more than $5 million each this year.

Also under attack is a provision that prohibits companies from making loans to top executives -- an idea that picked up momentum after disclosures that WorldCom Inc. chief executive Bernard J. Ebbers accepted $408 million in loans when the company's earnings were being misrepresented.

Business executives now complain that the law went too far by prohibiting relocation loans and insurance payments that are common in business.

"Is there a legitimate concern?" Rep. Michael G. Oxley (R-Ohio), chairman of the House Financial Services Committee and co-sponsor of the law, asked at yesterday's hearing. "Is there a way we can deal with that problem to make it work?"

James H. Quigley, chief executive of accounting firm Deloitte & Touche USA LLP, responded: "That's perhaps one issue where we might want to swing the pendulum back. . . . Some modification would be prudent and would facilitate business in the ordinary course."

But Richard L. Trumka, secretary-treasurer of the labor federation AFL-CIO, warned that rolling back any part of the law "would send the wrong message" to investors burned by collapses at WorldCom and Enron Corp. only a few years ago.

"Corporate reform is only starting to take root right now," Trumka said.

Trade-group representatives said in recent interviews that amending the Sarbanes-Oxley Act is unlikely this year, when elections will consume much of the public's attention and when little major legislation is expected to move through Congress.

"We'd like to work on a 'technical corrections' bill very much, but in the near term there is no way," said R. Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce. "At best, working on SOX is a next-year challenge." SOX is the nickname by which the Sarbanes-Oxley Act has become known.