Companies that did more complying and less griping about SOX benefited

Corporations that embraced Sarbanes-Oxley goals from the start by automating financial reporting and encouraging business-wide cultures of compliance have eliminated material weaknesses and slashed costs more quickly than other companies. "Some cut compliance costs by nearly a third this past year, at the same time they improved the effectiveness of their internal controls over financial reporting,” says Larry Raff, national partner in charge of KPMG’s 404 Institute, which conducted the survey.

Of the 930 executives with compliance responsibilities who responded to the survey (representing all sizes and all types of businesses), those that were most successful in reducing deficiencies while lowering costs shared some common traits: They automated much of the financial reporting process, integrated compliance into day-to-day operations to give employees a feeling of ownership, gave internal audit personnel strategic roles to play, centralized controls that are preventive, rather than detective, and adopted a risk-based approach before many of their peers.  "Companies that were ahead of the curve take a broad view of risk, embedding compliance efforts within the business,” Raff says. “That means having compliance teams such as internal audit more involved in early program development, rather than being brought in after controls are implemented.”

That’s the upside for the most successful firms. The downside is that the early implementers will see savings slow from now on. Lessons learned from experiences over the past three years have already netted big savings, according to the KPMG survey. And early adoption of the risk-based approach has sliced the number of controls to be monitored. From now on, says Raff, spending will decline at a slower rate due to the law of diminishing returns.

Another finding is that those companies that immersed themselves in SOX compliance from Day One are finding they can do more with less. “While a greater number of individuals are involved in the process, those individuals dedicate a smaller percentage of their overall time to compliance,” according to the survey by the 404 Institute. The Institute provides a platform for organizations, investors and stakeholders to learn about challenges and opportunities related to SOX section 404.

The SOX fan club is filled with investors

A majority of U.S. investors support the Sarbanes-Oxley Act and believe that the tightened rules mandated by SOX shouldn’t be eased, according to a nationwide survey of 1,001 investors conducted for the Center for Audit Quality (CAQ). In sharp contrast to corporate complaints about the excessive burdens of having to comply with SOX, more than 60% of those participating in the investor survey believe that the rules as they now stand should essentially be left unchanged. In fact, investors told the survey they would be unhappy if the regulations are eased. An overwhelming majority of investors—84%—say they now have confidence in the U.S. capital markets and in the financial information provided by companies, with 79% of those surveyed attributing that confidence to the changes brought about by SOX.

Among the provisions that investors seem to find effective are:

• The establishment of an independent audit committee and to have external auditors report to it (79%);
• Establishment of the Public Company Accounting Oversight Board to police the audit profession (76%);
• Section 404’s requirement for companies to monitor internal controls (76%); and
• Section 302’s requirement that CEOs and CFOs sign a written certification of financial reports (74%).

The telephone survey was conducted between July 17 and 23.

The ticket to driving down T&E expenses may be the card

With travel and entertainment (T&E) costs counting as the second-largest expense at most companies—and with hotel, car rental and international travel costs projected to rise—controlling and cutting those costs is a top priority for most organizations. One approach taken by big companies is the use of T&E card programs to maximize their travel program and minimize the impact of rising business costs. Now, JPMorgan Chase Treasury Services has issued a report in which leading U.S. companies share their best practices on controlling and cutting those expenses by leveraging T&E card programs. Among the best practices highlighted in the report are the following: use T&E visibility and reporting tools to leverage vendor discounts, satisfy Sarbanes-Oxley requirements, manage delinquency and establish effective controls and business rules.

Among those companies surveyed as part of the report include Chevron, ConocoPhillips, Sears and Starbucks. The free report is available from JPMorgan Chase.

People on the Move

Peabody Energy Corp., the $5.3 billion coal company with headquarters in St. Louis, appointed Gregg P. Wickstra CFO of Australia operations in Queensland and New South Wales. Wickstra, 53, came to Peabody in 1978 as a contract administrator and has held numerous senior management positions. From 1993 to 1995 he held the position of finance director for Peabody Resources Ltd., a former subsidiary of Peabody based in Sydney. Wickstra has spent over 30 years within Peabody’s U.S and Australian sectors, most recently serving as vice president of commercial services.
 
Knight Capital Group Inc., appointed Steven Bisgay CFO of the $951.2 million trade execution provider for online broker-dealers. Bisgay, 40, succeeds John B. Howard, who has accepted the CFO position with AQR Capital Management LLC. Since January 2006, Bisgay served as managing director of business development at Knight, based in Jersey City, N.J. Throughout the last six years with Knight, he has overseen financial control at the corporate level as well as internal audit. He came to Knight as director of internal audit in June 2001. Prior to joining Knight, Bisgay, a CPA, spent 12 years with PricewaterhouseCoopers LLP serving last as senior manager in the firm’s financial services industry practice.

Openwave Systems Inc., the $412 million provider of software solutions for the media and communications industries, with headquarters in Redwood City, Calif., named Jean-Yves Dexmier CFO. Dexmier replaces Harold L. Covert who has resigned for personal reasons. Dexmier, 55, brings 28 years of experience in financial and business management in software services and also serves on the board of directors at LookSmart Ltd. Prior to OpenWave, he served as CFO for various companies, including Informix Software from 2001 to 2005, which has since been acquired by IBM. He also served as president, CEO and CFO of Agentis Software from 1997 to 2000.

Lionbridge Technologies Inc., the $418.9 million provider of globalization and offshoring services, based in Waltham, Mass., announced that senior vice president and CFO Stephen Lifshatz, 48, is leaving the company. Lionbridge stated that Lifshatz’s resignation has no relation to the recent questioning of the integrity of the company’s financial statements. The company has named Jeff Fitzgerald acting CFO after Lifshatz’s anticipated departure August 24, until a permanent replacement is found through the company’s extensive search.

Teradata Corp., based in Daytona, Fla., has appointed Robert Young interim CFO of the $1.5 billion data warehousing software company that will be spun off by NCR Corp. by the end of the third quarter of 2007. Young originally joined NCR in 1978 where he held a variety of financial management assignments in the U.S sales operations. Other positions included management roles in corporate finance and administration, the financial solutions division and several other NCR operating units. He also served as general manager of NCR’s former workstation products division in Augsburg, Germany.

Oops. There goes another on-demand T&E spend management provider

The number of software providers offering on-demand software to companies to manage employees spending has shrunk by one with the acquisition of Gelco Expense Management by Concur Technologies Inc. Gelco Expense Management is the largest provider of global expense management and reimbursement solutions, processing more than 100,000 transactions and making payments of $20 million each day. Concur’s software as a service (SaaS) solution allows global companies to control costs by automating the processes; Concur enables companies to unite online travel booking with automated expense reporting, streamline meeting management and optimize the process of managing vendor payments, employee check requests and direct reimbursements. Based in Redmond, Wash., with $92.7 million in revenues, Concur will pay H-G Holdings Inc., the privately held company that owns Gelco and other subsidiaries, $160 million in cash.

Until now, Gelco and Concur have been competitors, says Aberdeen analyst Vishal Patel. But, Patel explains, a few years ago, the companies took different approaches to providing T&E solutions. Concur decided to become an end-to-end integrated software solution provider for all things related to travel and entertainment: a year ago, the company acquired an online booking company called Outtask and has been working to integrate that into their expense management offering. “With one solution, Concur wants to allow a business executive to plan travel online, book travel online, come back and do your expense reports within the same solution,” says Patel. Gelco, he adds, has stayed out of online booking, taking the tack of becoming “the best of breed provider for expense reporting and expense management side of things.” Gelco does the processing, auditing and payment of the T&E expense reports for its customers.

The acquisition allows Concur to strengthen its portfolio of services and scale up by adding Gelco’s 1,200 clients and 625,000 users to Concur’s base of 5,000 clients. This positions Concur to compete more effectively with big enterprise resource planning (ERP) providers such as SAP and Oracle and American Express.

Amex helps you get a grip on global T&E

Given the vast scale of global companies, corporate travel purchasers and managers need a quick way to pinpoint opportunities for controlling travel and entertainment (T&E) expenditures. Now, American Express Business Travel has released American Express AXIS @ Work, a Web-based management information data reporting solution. AXIS @ Work unifies information from some 60 key global business markets to provide corporate travel purchasers and managers with centralized online access to the company’s travel expenditures. The solution offers an intuitive graphic user interface, dashboards, standard reports to simplify information and customizable reports for those companies with unique needs.

American Express Business Travel is a division of the American Express Co., based in New York with $28.9 billion in revenues.

Is your target fund really based on your employees’ lives?

Ibbotson Associates, a unit of investment researcher Morningstar Inc., received a patent for a model, based on a balance of human capital (earning potential) and financial capital (savings), which it uses to help plan sponsors and providers develop custom 401(k) target date funds for participants. In general, the model calls for aggressive savings and investment strategies early in a worker’s career when his or her earnings potential or human capital is the greatest. As one’s human capital peaks and then declines, the emphasis for older workers with limited human capital must be on the preservation of the financial capital each has saved in the earlier part of their career. But it has the potential to allow individuals develop a fund that meets their own specific needs.