CEOs Ask Congress to Put Materiality Back Into Securities Laws [CFOJ]
The Business Roundtable, a group that "represents chief executive officers," doesn't like all the tedious disclosures that are now mandated by securities laws. Dodd-Frank gets a special mention. Rules that require disclosure of conflict minerals, median employee compensation and payments to foreign governments are made without regard to materiality and that bothers some people:
The disclosures represent important social concerns but, “it adds a lot of unnecessary cost into the system from a corporate perspective,” said John Hayes, chief executive of metal packaging supplier Ball Corp. and chairman of The Business Roundtable. Companies are getting fatigued by all the new disclosures, which push securities filings into unfamiliar areas, he said.
“And even from an investor perspective it starts to blur the line about what’s important,” Mr. Hayes said. “[Securities and Exchange Commission] filings are supposed to help investors make informed decisions and it’s unclear whether investors are using this for that purpose,” he added.
It seems that Hayes is forgetting the qualitative or subjective nature of some disclosures. A company's management deciding "what's important" isn't always the best policy, which is why regulation is necessary from time to time. Yet, he is quoted later to say, “If we thought it was material to having our investors make informed decisions we’d be talking about it already." In other words, "Trust us, we know what we're doing," as if corporations have nothing to hide or have never submitted an unreliable, misleading or grossly inadequate filing.
Ernst & Young pay bonanza threatens to reignite City salaries row [The Guardian]
The UK firm's 696 partners earned an average pay of £700,000.
SEC Charges Executives for Defrauding Investors in Financial Fraud Scheme [SEC]
The former CEO and CFO of a company called ContinuityX whipped together $27.2 million in revenue from April 2011 to September 2012, "selling internet services to businesses." Turns out, "99 percent of it came from fraudulent and fictitious sales." Matt Levine is looking for the legit 1% of the business. Here's one part of it that is not:
In one alleged scheme, [David] Godwin and [Anthony] Roth approached companies to become a straw buyer of services from Internet providers, promising them they would not have to pay for the services and would receive a portion of the commissions paid to ContinuityX by the providers. ContinuityX allegedly reported the commissions from the sham sales as revenue in its quarterly and annual reports. In another scheme, Godwin is alleged to have fabricated service orders and to have caused ContinuityX to recognize revenue from these fake transactions.
They used those fake revenues to raise millions to, basically, pay themselves big salaries. They also didn't bother with financial reporting, internal controls, etc.
In other news:
- "China-based advertising company" Focus Media also settled an SEC enforcement action. [SEC]
- MBA enrollment is up. [WSJ]
- "Traditional" CFOs peform the worstest. [BI]
- Sheryl Sandberg wrote an op-ed. [WSJ]
- "I’m a great animal lover and I’m involved in a lot of conservation, but animals don’t have rights. They don’t have bank accounts. They don’t vote. We have obligations. We have obligations to animals, but to say they have rights? They don’t have rights. You only have rights if you pay your taxes. You earn your rights." [ITV]