Investors Still Feel Listed Company Regulation Is Too Lenient

by Glen Shapiro, LawAndTax-News.com, New York

25 October 2005

A recent survey conducted by the Wall Street Journal Online and Harris Interactive has found that despite the passing of the Sarbanes-Oxley legislation three years ago, more than half (55%) of US investors think that the financial and accounting regulations governing publicly held companies are too lenient.

The survey additionally found that regardless of government regulation, investors are more likely to believe that punishment for poor corporate governance should be directed at certain individuals rather than the company as a whole.

In addition, almost one-third (30%) of investors say they have reduced or divested their holdings in a company as a result of poor corporate governance.

According to the poll, only one-quarter (25%) of investors felt that the Sarbanes-Oxley legislation has made the communication of financial information by companies much more or somewhat more transparent. Around one in 10 (11%) investors actually stated that in their opinion, the legislation has had the opposite effect.

While just under half (45%) of investors believed that boards of directors are most responsible for corporate governance, ahead of the CEO (22%), senior management (19%) and all employees (14%), about two-thirds (66%) thought that boards of directors are only somewhat or not at all effective in overseeing the companies they govern.

However, the survey results revealed that should a company exhibit poor corporate governance, investors are split as to who should receive punishment. Similar numbers believed the executives (48%) and the board of directors (42%) should be punished and only 10% believed that punishment should be directed at the company.

"The clear message, when you look at recent corporate scandals, is the folks who got hurt the most were the employees and this poll indicates that's not what the public wants," observed Robert Fronk, senior vice president of the Harris-Wirthlin Brand and Strategy Consulting Practice. He added: "Someone needs to pay the price, but they want that someone to be those who were personally responsible."

Harris Interactive conducted the survey online within the United States between Oct. 4 and 6, 2005, among a nationwide cross section of 2,061 adults aged 18 and over, of whom 1,248 were investors.

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