Is Sarbanes-Oxley Overzealous?

During a pleasant cocktail reception at a users conference in Phoenix, I was shooting the breeze with an elite consumer goods crowd that was eager to learn more about trade promotions. What started off as light banter about deductions and customer scorecards, however, soon turned to doom and gloom predictions about Sarbanes-Oxley, OfficeMax and handcuffed execs being shuffled off to the slammer.

To recap, OfficeMax is one of the latest high profile companies to take a Sarbanes-Oxley bullet. Brian Anderson, the company's CFO, resigned in January after having been at the position since November. The resignation came as four employees were fired as the result of an ongoing internal investigation, which confirmed a vendor's complaint that some bills were falsified to the tune of $3.3 million. The bottom line? Anderson would have been required to certify OfficeMax's financial statements for the year under the Sarbanes-Oxley Act. And so would Christopher C. Milliken, the CEO of OfficeMax who resigned one month later.

The OfficeMax story is intriguing, sad and frightening for three main reasons: 4One of OfficeMax' consumer goods clients most likely told on them (intriguing).

4Execs with solid reputations are forced to walk away from incredible career opportunities (sad).

4Sarbanes-Oxley is going to uncover many more trade promo scandals (frightening).

So, will innocent and not-so-innocent execs be dancing to the jailhouse rock for approving financial statements they believe to be completely accurate? Probably. Should Sarbanes-Oxley be deemed an inappropriate and overzealous piece of legislation? Probably not. The widespread disruption and investment needed to meet compliance will dissipate as time goes on. Thousands of inefficiencies will be uncovered and, best of all, the way sales and marketing strategies are conducted will be forever changed for the better.