WASHINGTON - Corporate executives and board members are forever telling Maryland's Sen. Paul S. Sarbanes how difficult he's made their lives.
"They tell me, `This is really making us work extra-hard,'" says Sarbanes, a Democrat and the chief author of last year's sweeping corporate reform legislation.
But the complaints don't bother him.
"They should be working hard," he says of the corporate chieftains, directors and accountants whose jobs were forever changed by the bill, which marks its first anniversary of enactment tomorrow.
"There's an effort here to change this culture of being fast and loose with things, and to tighten up the standards, and to recognize the importance of the responsibility that they bear toward the investor," Sarbanes said of the measure in a recent interview.
It has been one year since Congress responded to the crisis of investor confidence sparked by such spectacular debacles as Enron and WorldCom with legislation that aimed to better police executives and accountants, and hold them more responsible for misleading shareholders.
The effects of that measure, known as the Sarbanes-Oxley Act, are only now beginning to be felt as lawyers and regulators struggle to digest its implications and move to comply with it.
Although Sarbanes wrote much of the framework of the legislation, it also bears the name of Ohio Rep. Michael G. Oxley, the Republican chairman of the banking committee, who joined the Marylander in completing it and pushing it to swift enactment.
Oxley said he has been surprised that the measure has received so much public attention that it has become, at least in some circles, "almost like a household word."
"I haven't talked to one CEO - and I talk to a lot of them - who hasn't said that their businesses have changed significantly because of this," Oxley said last week. "It tends to drive virtually every decision these days."
Business groups grouse bitterly about the measure's effects on the corporate world. The Sarbanes-Oxley law, they say, has created a labyrinth of regulation that is confusing and expensive to comply with, and will ultimately hurt individual investors by raising corporate costs.
Although many of the law's provisions will not be felt for years, most agree that its enactment has bred new vigilance among corporate executives, directors and auditors about issuing clear, accurate and honest financial information. It has also led to a flurry of activity among lawyers and accountants, many of whom are making a new, full-time occupation of decoding the law's requirements.
Under the law, for instance, chief executives and chief financial officers must certify their companies' quarterly financial statements, and pledge that they have in place effective "internal controls" to guard against fraudulent reports.
Firms are feeling the effects of that requirement in their pocketbooks, executives say.
"It certainly seems to have raised the cost of doing business," at T. Rowe Price, Inc. in Baltimore, the nation's seventh-largest mutual fund company, said Vice Chairman James S. Riepe.
The company has not calculated how much the Sarbanes-Oxley law has taken away from its bottom line, but the strain is being felt in the many hours employees spend in meetings preparing for the certifications, and the added personnel it takes to pore through voluminous books that lay out "these very bureaucratic processes," Riepe said.
Business surveys over the past year have found that complying with the statute is expensive. The Business Roundtable, a leading association of chief executives, found that member firms were spending between $1 million and $10 million annually as a result of the new law. A study by the business law and consulting firm Foley & Lardner found that the cost of being a publicly traded company has increased by nearly 100 percent as a result of the new compliance requirements.
The impact of the year-old law is being felt not only in executive suites but in boardrooms, where directors and auditing committees face new rules that they must be independent and play a direct role in overseeing the company's auditors. As a result, many of them say they are spending more time and effort on their director duties, and approaching the work with more rigor.
"It's really been a year of blocking and tackling, where companies are implementing a lot of changes to their governing practices," said John J. Castellani, the president of the Business Roundtable.
"Before Sarbanes-Oxley and before Enron, it was cozier," says Gary Gensler, a Clinton administration Treasury Department official who helped draft the law.
"The law sort of helps directors, because it's no longer rude to ask the questions," said Gensler, who is on the board of Strayer Education Inc. "Now, it's a matter of law that I have to ask."
Accountants, too, feel more free to raise sensitive issues with corporate managers under the new regime, said Chuck Landes, an official with the American Institute of Certified Public Accountants (AICPA).