MEDIA WATCH: Media lauds latest SEC effort to prompt corporatetransparency

Corporate America's image has had a very rough year. As BusinessWeek (August 12) observed, "The shock of widespread corporate crime has tarnished the credibility of our nation's corporate elite, hurt the markets, and threatened the economy."

Corporate America's image has had a very rough year. As BusinessWeek (August 12) observed, "The shock of widespread corporate crime has tarnished the credibility of our nation's corporate elite, hurt the markets, and threatened the economy."

Faced with this situation, the SEC offered the largest US companies an opportunity to prove their innocence to investors once and for all. All 947 US companies with more than $1.2 billion in annual revenue were ordered to have their CEOs and CFOs certify under oath that their most recent quarterly and annual reports were truthful and in full compliance. For 745 of these companies, those that operate on the calendar year, the due date for their certification was August 14.

An SEC spokesman portrayed the certification requirement as handing PR and IR communications officials an opportunity on a silver platter, provided, of course, their finances truly were in order: "We wanted to give companies the opportunity to show investors that they stand behind their numbers and that they should not be compared to corporate bad actors who have brought so much pain to America's investors (Atlanta Journal-Constitution, August 11).

Coverage also pointed out that the certification requirements put a lot of pressure on CEOs and CFOs, but viewed this as a positive development for the most part. The media viewed the threat of personal jail time as a powerful incentive for corporate executives to get their finances in order. For their part, CEOs and CFOs were frequently depicted as taking the certification process seriously, making their top lieutenants swear to the results of each of their departments.

However, it was also suggested that, in the short term, "potentially bigger motivators for the companies are the likely costs in terms of PR or the stock market (Orlando Sentinel, August 14). Either way, reporting more often than not suggested that the certification process would boost investor's confidence and trust.

A number of reports addressed the consequences of failing to pass the SEC's certification test or even the danger of being perceived as reluctant about it. A Hormel Foods executive told US News & World Report (August 19), "We were worried about perceptions that we didn't have it in on time. And on the CNN Money website, an August 15 survey of 30,000 people found that only 5% would invest in a company whose CEO and/or CFO would not personally swear to the accuracy of the company's financials.

At the same time, there were pragmatic acknowledgments that even the SEC's certification requirements would not be enough to prevent fraud.

Many articles pointed out that accounting is not a black-and-white matter.

Instead, it often involves judgment calls as to how to book certain expenses over what time period. Fortune (September 2) wrote, "Clever managers have always had, and continue to have, access to perfectly legal tricks to help their balance sheets and income statements look better than they really are - tricks that even today won't jeopardize their ability to swear to the SEC that their books are on the up and up."

"Critics argue the oath is more PR than investor protection, according to NBC Nightly News (August 12). The two are intertwined, to be sure.

The goal here should be both open communications to the public, as well as a legitimate commitment to fair business practices. The PR will only be as good as the policy behind it.

Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.

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