The unexpected benefits of Sarbanes-Oxley.

In the wake of a series of gross corporate abuses around the turn of the century, Congress passed Sarbanes-Oxley, which was intended to make corporate governance more rigorous, financial practices more transparent, and management criminally liable for lapses. The first year of implementation was costly and onerous, far more so than companies had been led to expect. In the view of a few open-minded firms, however, the second year of compliance turned out to be not only less costly and less onerous (as doing something for the second time usually turns out to be), but a source of valuable insights into operations, which management has translated into improved efficiencies and cost savings. The areas of improvement go well beyond technical statutory compliance. They include a strengthened control environment; more reliable documentation; increased audit committee involvement; better, less burdensome compliance with other statutory regimes; more standardized processes for IT and other functions; reduced complexity oforganizational processes; better internal controls within partner companies; and more effective use of both automated and manual controls. The result is not only shareholder protection, the official purpose of the act, but also enhanced shareholder value. More than a year since the first deadline arrived, Sarbanes-Oxley still inspires fear--of enforcement actions, of the stock market's reaction to a deficiency, and of personal liability. Fear can be a powerful generator of upstanding conduct. But businesses run on discovering and creating value. Companies need to start viewing Sarbanes-Oxley as an ally in that effort.