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Investors Say Sarbanes-Oxley Got It Right: Study

(July 30, 2007)-- As U.S. regulators and industry recognize Sarbanes-Oxley's fifth year this July 30, most investors (57 percent) in a new survey by Pepperdine University's Graziadio School of Business and Management believe the requirements imposed by the law, holding CEOs and senior management personally accountable for the accuracy of their companies' financial disclosures, are about right, while one-third (31 percent) say its restrictions did not go far enough. Only eight percent say the law went too far.

The study on investor attitudes toward CEOs and their corporate boards finds almost nine out of ten investors say that jail time should be mandatory for corporate officers and board members convicted of practices harmful to employees, shareholders and the public. Four out of five investors surveyed favor actions by prosecutors to aggressively recover company losses from convicted executives and/or board members' personal assets.

"Sarbanes-Oxley's intent aligns well with investors' expectations that corporate management adhere to higher standards of conduct and transparency, and that there should be serious consequences for wrongdoing," said Dr. Linda A. Livingstone, dean of the Graziadio School of Business and Management.

"More than two-thirds of the investors in our survey hold that companies are responsible not only to those who own stock but also other stakeholders, such as employees, customers and the public, and believe CEOs and their boards should act on their behalf, as well," Dr. Livingstone added.

The Graziadio School Corporate Board Study is based on interviews with 482 investors conducted by Opinion Research Corporation(R) on May 31-June 4, 2007. Investors are defined as those with $100,000 or more in either mutual funds, individual stocks or a combination of the two.

Under new SEC provisions enacted last year companies are required to explain their pay policies. Examining investor attitudes on the issue of executive compensation, three out of four respondents (77 percent) said that corporate boards are awarding CEO's too much compensation. Only 18 percent believe executive pay is about right, while 2 percent contend executives receive too little. Almost 63 percent of investors surveyed believe there should be a cap on CEO compensation, as opposed to 34 percent who disagree.

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