We won't really know the consequences of financial-reporting reforms until they are tested in the next bull market. (May it begin soon.) What we do know is that the actions of Congress, market authorities, and regulators to restore investor confidence affirm the first law of change: whatever happens, more work will be created for consultants and lawyers.
This month's CFO takes a look at where implementation of these reforms stands today, one year on. The cover story, "Sticker Shock", and the accompanying reader survey affirm the second law of change: whatever happens, it will cost more than you think. As staff writer Alix Nyberg reports, companies across America are spending more time and money on complying with Sarbanes-Oxley than they expected to, regardless of how well their existing practices conform to compliant formats. Most troubling: although some companies see compliance as an opportunity to improve their control systems, only 30 percent of the finance executives surveyed believe the benefits justify the costs.
On another reform frontier, progress is just as muddled. In "Good to Rate?", senior writer Tim Reason explains that while it is clear the big rating agencies failed to call the Enron and WorldCom debacles, it is not clear why, or what to do about it. The SEC itself is so divided on the question that it has identified two possible, contradictory proposals, both of which are problematic.
None of this is to say that reforms weren't necessary, merely that they are far easier to legislate than to implement. And it falls to the implementers — you — to suffer through the first and second laws of change long before learning if reform will really work.