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Which Story Do You Believe About Corporate America?

It will be my pleasure to focus on the Christmas story in the next few weeks but for those of you who follow the financial markets, we have been hearing two different stories about the viability of our corporate titans.  The dichotomy comes into play when any confrontation takes place about the importance of the Sarbanes Oxley Act or SOX for short. 

You see, many of our corporate leaders are threatening to take their companies private so they don’t have to put up with the reporting and responsibility requirements of SOX.  In this sense they are trying to show how weak our financial system is by bad laws.  These same companies don’t really sing the same song when they go to China or Europe and compete for business while exuding all the bravado of strength and power in trying to win in their various markets.

There are many detailed analyses of SOX and why it may need to be modified in some ways.  The corporate position in my view is that current managements don’t like to have to take more personal liability to convince investors that the financial statements for their companies are accurate.  They are unhappy to be placed in the crucible of transparency in the post Enron/WorldCom period.  Why is the quest for truth so difficult?  As companies get larger, the span of control often weakens and top level executives are in fact often out of touch and even more so unable to verify with certainty that information they release about the company is indeed correct.

Proverbs 11:1-11 provides the reason that Christians who are investors and Christian Financial Advisors should expect compliance with SOX and even more.  “The integrity of the upright guides them, but the crookedness of the treacherous destroys them.”(v. 3)

“With his mouth the godless man would destroy his neighbor (or shareholder), but by knowledge the righteous are delivered.”(v. 9) Publicly held corporations have benefited by having investors place significant funds in their business.  To be held accountable for honesty and integrity is not too much to ask.  It is indeed our Biblical responsibility to hold each other to higher standards.  There is significant data coming out that shows that since SOX was enacted, the number of write downs, accounting changes, and charges to earnings is at a 15 year low.  Which story are you buying? 

Sent December 4, 2006

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