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Foley & Lardner partner Frederick Koenen hears it all the time from his clients: Something had to be done about corporate excesses to restore investor confidence, but their companies weren’t the ones that needed to make changes. That paradox perhaps lies at the heart of the responses Foley elicited when it queried corporate insiders about their views of the Sarbanes-Oxley Act, the sweeping set of corporate reforms enacted in July 2002. The Milwaukee-based Foley sent a seven-question query by e-mail on July 21 to 1,912 company executives, including chief executive officers, general counsel and chief compliance officers. Within a week, 10 percent had responded, giving lawyers a glimpse into the psyche of corporate insiders. The firm released its survey results last week. The picture that emerged is that companies are chafing under the law. Nearly 75 percent of executives who responded said they felt like they’re now exposed to greater liability under Sarbanes, and 93 percent said they expect the rising costs of compliance will continue to increase over the next year. However, 72 percent said they support increased scrutiny of corporate governance. Of course, 60 percent also said reforms had gone too far. The San Francisco-based Koenen said Sarbanes has executives thinking more carefully about rules and regulations — and that’s a positive development in his view. “The flip side is that you can’t scare people so much they’re unwilling to take risks,” he said. Michael Halloran, a Pillsbury Winthrop partner, blames uncertainty for some of the negative reactions. Though Sarbanes has been law for a year, many provisions have yet to take effect completely, so people aren’t sure what to expect, he said. “Some of it is a reaction to the fact that [Sarbanes] felt like a sledgehammer,” Halloran said. “Many believe that something had to be done to restore investor confidence, and Sarbanes was a step in the right direction.” In the survey, executives were split when it came to whether investors were confident again. Nearly 54 percent said they agreed that Sarbanes had helped boost confidence in company financials. Sergio Garcia-Rodriguez, general counsel of Protein Design Labs Inc., said a major positive from Sarbanes is that more companies are paying attention to corporate governance. That attention will continue to produce changes. “I think many of the things covered under Sarbanes-Oxley were already illegal or improper,” Garcia-Rodriguez said. “So what’s new here is continued emphasis on corporate governance, and that’s appropriate.” Garcia-Rodriguez predicted Sarbanes will one day be remembered as a catalyst for change when it comes to companies paying attention to how they operate. “Corporate governance to me is more than a technical compliance with rules,” Garcia-Rodriguez said. “It means stepping back from the rules and regulations and asking yourself what kind of culture do we want to adopt.”

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