EDITORIAL: Need for information on competitors grows as the post-Sarbanes-Oxley market picks up

A sentence in WPP's 2003 annual report looks like it was lifted from PRWeek's pages. "In the absence of reliable league tables, measuring market share has become difficult."

A sentence in WPP's 2003 annual report looks like it was lifted from PRWeek's pages. "In the absence of reliable league tables, measuring market share has become difficult."

The statement appears on the overview of the holding company's PR and public affairs business, written by EVP Howard Paster. Absurd though it sounds, I have never seen a holding company executive state, on the record, that it would be better if operating company data were still made available. Obviously the revenue of firms like Hill & Knowlton and Burson-Marsteller is not material information for shareholders. But it has long been a critical part of the marketing landscape, offering firms a chance to benchmark performance, particularly in practice areas and regions. For the holding companies, it is the regions that have been among the hardest hit by the clampdown. An Ogilvy office may have a small but growing presence in a burgeoning market where a larger independent has dominated. In the absence of data, important business gains cannot be tracked or used for local marketing. Paster clearly accepts the situation, but says more information would be helpful, particularly now as the market improves. "Sarbanes-Oxley [SOX] compliance prevents us and our principal competitors from providing data which would otherwise give some value to us," he says. "Coming as we have through three difficult years, it would be useful to know reliably how others have been affected." Firms' efforts to comply with SOX will pay off Speaking of SOX, PR agencies that are part of holding companies have been striving to comply with the legislation by the end of this year, working closely with their parent organizations and deploying internal resources to the task. The road to compliance has not been straightforward, because of the way the legislation was written. "There's a lot left to interpretation," explains Marty Franken, CFO of Weber Shandwick. "There is no concept like materiality, which is the normal concept we live with every day. "Consequently," he continues, "almost every rock needs to be turned over and everything needs to be buttoned down. The biggest hurdle we have all faced is we needed to reevaluate where we put emphasis on controls, compared to how we handled it in the past." For a global firm, it means an office in Malaysia has to worry about the control environment as much as the headquarters in New York. For WS, and no doubt others, the process has meant introducing more centralized controls. Greater accountability is a net benefit of compliance, in spite of the hard work it takes to get there. "Committing to SOX standards should give agencies far greater comfort when it comes to assigning and enforcing their business intents, purposes, and behaviors in a way that's nothing short of upstanding," says Aaron Kwittken, president and COO of Euro RSCG Magnet. "SOX is a sobering and necessary reminder to us all to focus like a laser on the business of the business." Franken says clients expect nothing less. "If our clients felt we were not SOX compliant, they could be gravely concerned."

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