Sir,
Your summary of recent research by Mori and PwC (“Act could have unwelcome outcome” FT March 30, 2005) referring to the Sarbanes-Oxley Act, finds that three quarters of investors and analysts would sell or mark down the shares of companies that reported ineffective internal controls against fraud.
Your headline describes this as an unwelcome outcome, why? Companies that have insufficient controls are in danger and, as a consequence, cannot be valued as highly as those that have the required controls.
The true cause for concern is that this means that a full 25% would NOT mark down these shares.
They either don’t think that the market will hit the share prices of these companies (does anyone believe that?), or they don’t value good controls, or both.
In either case, they shouldn’t be in their jobs, either as investors (at least on behalf of others), or as analysts! Sounds like they are the types which have been around until now, laying back and taking the bonuses generated by the bull market, no effort.
These guys are no help in our effort to ensure that shareholders take a more active role in ensuring that their companies maintain the governance line!
Related links:
Sarbanes-Oxley could have unwelcome outcome (registration required)
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