Companies go to extreme lengths to escape US laws
What is the difference between doing business in the UK and doing business in the US?
That was, ostensibly, the question concerning a roundtable hosted by the
ICAEW last week. But the
meeting focussed more on attempts to resist US rules-based procedures in the UK,
with the institute and the CBI spearheading attempts to get the US to recognise
the UK principles-based approach.
Tim Bush, of Hermes, put the case for the prosecution, in outlining just how
tedious and problematic doing business in the US has become.
Even pre-Enron one company said of the US, Bush explained: ‘US accounting was
cumbersome, and still missing the point; things were ‘altogether too litigious’
and that there was no need to have a listing anyway as US capital was investing
outside the US.’
And if anything, the situation has now got worse. Enron has come, and the SEC
has become a knee-jerk regulator defining rules ever more precisely. Companies
go to extreme efforts to avoid the US altogether.
Pearson CFO Robin Freestone said that the increase in rules had itself added
to litigation, too. Rules are not necessarily clear, as the stock options saga
in the US demonstrates.
Just four months after implementing a new strict regime of how companies must
disclose executive compensation, the Securities and Exchange Commission issued a
rather quiet statement, three days before Christmas, saying it would take
another look at those rules.
The local financial press has picked up on the odd timing of the change at
the very same time as the investigations, being conducted by the department of
Justice and Internal Revenue Service, seem to be heating up.
And what about Enron? Sarbox was the most obvious consequence. Can the US
protect itself against further disasters without burdening business?
Bush said: ‘Have accounting standard setters [and regulators] really resolved
the Enron problem five years later?’ I think that we are waiting to hear from
the FASB and IASB [and SEC] on that, in plain understandable English… that’s not
too much to ask.’
With cash flowing to London rather than to New York, US regulators may have
to start learning plain understandable English and fast.