CFOs and Finance Executives Favor More, Not Less, Regulation; Express Dissatisfaction with Finance and Accounting Associations

Dec 02, 2002, 00:00 ET from Business Finance Magazine

    DARIEN, Conn., Dec. 2 /PRNewswire/ -- In a real-time poll of 450 CFOs and
 senior finance executives conducted last week, 90 percent responded that they
 believe new regulations designed to make corporations more accountable to
 shareholders are necessary.
     The poll was conducted during a live webcast conference with former
 Securities and Exchange Commission Chairman Arthur Levitt, conducted by
 Business Finance Magazine.
     Moreover, in another poll taken during the conference, nearly two-thirds
 (62%) of the respondents who claim membership in finance and accounting trade
 associations (including the American Institute of Certified Public Accountants
 (AICPA), the Institute of Management Accountants, Finance Executives
 International, and the Securities Industry Association) stated these
 associations were not "representing their best interests".
     Even more revealing is the fact that 36 percent of the meeting's attendees
 said they have at one time felt pressure to fudge earnings reports.
     On the heels of the publication of his controversial new book, Levitt
 joined Business Finance publisher David Blansfield for a live, one-hour
 Webcast conference on Tuesday, November 19th, to discuss accounting reform,
 financial reporting, and the crisis in corporate governance.  The Webcast,
 titled "Is It Time for Corporate America To Walk the Walk?" was the first of a
 series of "Influencers" webcast conferences from Business Finance -- meetings
 with individuals who are influencing the finance profession -- that will
 continue in 2003.
     Levitt's comments mirrored the tone of his new book, as he railed against
 the AICPA and Big Five accounting firms for being misguided in their dealings
 with government and their clients.
     "In general, accountants are fair, decent, hard working, unappreciated
 people, but the leaders of the Big Five accounting firms and the AICPA were so
 mindless of a developing crisis in how they were viewed by the public. I began
 to see more cases of financial fraud, really bad behavior, and situations with
 the accounting firms that were real conflicts of interest," said Levitt.
     When asked whether the new financial reporting regulations were necessary,
 Levitt confirmed that the unethical accounting practices that have received so
 much media attention were not merely the result of "a few bad apples."
     "I think we've experienced a two-decade long erosion of ethical values on
 the part of corporate America as the function of a runaway bull market," said
 Levitt, "and this represents in my judgment a systemic flaw that needs to be
 addressed, because the problem is pervasive. If companies A and B are engaging
 in questionable behavior, companies C and D can't be far behind. What was bad
 practice soon becomes unethical, and what was unethical soon becomes
     Levitt reflected on his tenure with the SEC, and what prompted him to
 become a champion of the individual investor.
     "When I came to the SEC, I had an agenda.  I had enough respect for our
 country's capital markets, which had given me virtually everything I'd ever
 owned, to believe that public confidence is at the core of those markets,"
 said Levitt.  "I think that American investors are the best protected of any
 in the world.  They are protected essentially by a trilogy: the enforcement
 efforts of the SEC against fraud, the enforcement efforts of the self-
 regulating organizations -- the major stock exchanges and the NASD -- and
 finally, private rights of action.  I absolutely believe that every element of
 this trilogy is essential for protecting American investors."
     Levitt revealed that backing down from the stock option expensing issue
 was his biggest regret of his career.  "A lot of the excesses that occurred in
 the 90s were the result of stock options improperly accounted for and
 improperly awarded -- that's a joint responsibility of boards of directors and
 compensation committees.  Expensing stock options is a litmus test for those
 companies that stand with investors and companies that don't," he said.
 "Silicon Valley companies may be the last to come to the table, but they will
     The Webcast was sponsored by BizNet Software, a service provider that
 specializes in helping companies optimize their systems to improve the quality
 of their financial reports.
     To replay this webcast, visit
     Levitt will continue to discuss corporate governance and accounting reform
 when he joins Business Finance for a second live, one-hour Webcast conference
 on Thursday, December 19 at 12:00 pm ET.  To register to attend visit .
      David Blansfield
      Business Finance Magazine
      (203) 559-2849
     This release was issued through - Your Source for Affordable
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SOURCE Business Finance Magazine