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It’s Time to Take Your SOX Off

It’s Time to Take Your SOX Off

by Toby Lucich on December 16, 2004

To protect shareholder value, companies must link risk management with strategic planning and avoid overreacting to regulatory compliance mandates.

Here’s a fact that bucks conventional wisdom: More shareholder value has been wiped out in the past five years as a result of mismanagement and bad execution of strategy than was lost because of all of the recent compliance scandals combined. This is a key finding of a recent Booz Allen Hamilton survey and analysis of the performance of 1,200 firms with market capitalizations of more than $1 billion for the five-year period from 1999 through 2003.

Consider the 360 worst financial laggards. Eighty-seven percent of the value lost by these firms was attributable to strategic missteps — management ineffectiveness in reacting to competitive pressures or forecasting customer demand — and operational blunders, such as cost overruns and M&A; integration problems. Only 13 percent of the value destruction suffered by these companies was caused by regulatory compliance failures or was a result of poor oversight of company operations by corporate boards.

It’s Time to Take Your SOX Off

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