Profitability

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The regulatory landscape has rarely been more uncertain for American business. Corporate governance scandals, an activist culture in state executive and legislative branches, new scientific discoveries, and other factors are combining to usher in a new era of government regulation. For a company that doesn't anticipate the potential effects of upcoming legislation and regulatory guidelines, the costs of compliance could be just as debilitating as those of non-compliance.

Corporate Governance
For many years, government agencies like the Securities and Exchange Commission (SEC) delegated much of their regulatory duties to industry bodies, like the New York Stock Exchange (NYSE) and the American Institute of Certified Public Accountants (AICPA). Now, following the corporate malfeasance episodes that started hitting the news in 2001, the trend pendulum has swung back toward direct government oversight.

The SEC, for example, is committed to increased ownership of its regulatory duties. The commission has announced that it will be mandating accelerated and more comprehensive disclosure of financial information to investors, outlining further protections for investors, and enforcing SEC rules and regulations more swiftly and aggressively. Public companies also face a new set of rules governing how they get listed on U.S. stock exchanges, following the late 2002 compensation scandal at the NYSE.

But the most concrete development has been on the legislative front. June 1, 2004 is the deadline for compliance with most significant aspects of the Sarbanes-Oxley Act (the Act). Companies large and small currently ...