Repeal SOX or Reduce Regulatory 'Taxes'?

By John H. Capobianco, Lumigent Technologies

Former Speaker of the House Newt Gingrich is calling for the repeal of the Sarbanes-Oxley Act to spur the economy. I can appreciate his reasoning, especially regarding the "hidden tax in yearly compliance costs."When I took a company public two years ago, annual spending in our finance department soared from $300,000 to $2.5 million, mostly to cover manual compliance reporting - a "compliance tax" of roughly $2.2 million per year that delivered exactly zero benefit for my products, my consumers, my employees or my company.

With respect to Mr. Gingrich, however, I can't imagine popular opinion backing the repeal of SOX. Overall, people are wary of Wall Street, and the overwhelming, bi-partisan consensus favors more regulation, more oversight and more accountability - not less. So, the bigger issue is regulation in general, not just SOX.

The knock against regulations is that they hamper companies, their competitiveness and ultimately, the economy. Yes, regulations necessarily impose additional costs - the hidden tax - on the companies that must demonstrate compliance. However, reducing regulations to ensure competitiveness isn't an option. People believe a lack of regulatory pressures played a role in our current economic decline, and they believe more regulation will help restore the economy and our confidence in American corporations.

Instead, we need to comply with a growing number of regulations in a way that increases corporate transparency and visibility without introducing onerous costs that sacrifice competitiveness. We need a way to have our cake and eat it, too - something that information technology is particularly adept at doing.

From an IT perspective, regulatory compliance (along with governance and risk management) makes up the latest chapter in a 40-year effort to streamline business by automating processes that were previously done by hand. IT has already automated a lot of basic financial reporting and standard business processes in enterprise resource planning and logistics, manufacturing, banking and elsewhere.

What IT hasn't automated yet is the human influence in business, making it a more streamlined process by exposing all the processes inside a business that pertain to the management of that business. Such visibility and transparency are necessary for a business to become more competitive and to best meet regulatory demands. In addition, the automation will free people to spend their time engaged in creative business activities, building the strategy of the company, and pursuing current and future opportunities rather than wasting their time monitoring and reporting on their past activities.

Going forward, businesses can expect more regulations, but they can also expect more IT solutions that automate data and controls audits and other routine but time-consuming tasks that demonstrate regulatory compliance and address auditor inquiries. In other words, IT will put corporate America in the position to give itself a compliance tax cut that has no adverse impact on its ability to meet underlying regulations. In turn, companies can focus their energies on satisfying customers, turning profits, and, yes, even spurring the economy.

John H. Capobianco is president and CEO of Lumigent Technologies, providers of GRC business control applications, and can be reached at [email protected].