Face the Reality of SOX
Sarbanes-Oxley (“SOX”) has been dominant in the US business landscape for the past three years. Much is said of the unproductive cost of this compliance to American businesses (now estimated to run as high as $15 billion annually). As is frequently the case with new regulations, figuring out how to implement it has been far from clear and has been enormously time consuming for all.

Leaving aside the difficulties and costs associated with the outward compliance with the law, it is our belief that the deeper intent of SOX is inherently good for all business endeavors. Worn correctly, SOX can be a very pragmatic source of discovery and transformation to strengthen those norms and behaviors that lead to financial success.

SOX is here to stay. A leader’s challenge is to turn this to advantage, to turn a cost into an opportunity. Turn SOX inside out. Here is one view of what that might look like.

Seize the Opportunity
The deeper intent of the Sarbanes-Oxley law is to create – or assure – transparency for investors in the market. Investors have lost faith due to misinformation or fraud. The law was created to make sure investors get truthful financial information about the health of companies.

In order to accomplish this transparency, companies will hold individual employees to greater accountability. Procedures require that company employees, from the CEO on down, formally sign off on the accuracy of information that is material, or “of significance,” to investors. By doing this, SOX is essentially saying:

• You are accountable, so act like it
• Take responsibility not only for your own personal work but also for the work of your colleagues
• Make it your business to know whether or not the work of your company is accurate and truthful
• If something is wrong, don’t just ignore it; it is your responsibility to disagree and take action to correct it
• Be honest
• Be transparent

One impact could be that employees will be forced to think and act more like owners: responsible, ac-countable, and knowledgeable across the business, whether it is in their job description or not. Now, that’s not necessarily a bad thing. Imagine what companies would be like if their employees acted more like fully responsible owners in all aspects of business decisions, from strategy to research and development, to innovation, etc.

SOX is kind of like being required to sign off on your annual physical. Any health risks we should know about? But the act of having a physical does not make anyone healthy and being honest and transparent about the results does not create good health. As we all know, good health comes from the personal choices we make around lifestyle – how we act and live each day: exercise, diet, exposure to risks, etc. SOX is more about the reporting, and less about creating health. This is where we begin to turn our SOX inside out. What leadership should really care about is being a healthy company.

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