Posted by: GuyPardon
corporate reporting, e-discovery, governance, SEC, SOX, transparency
This is a guest post from Barclay T. Blair, author of Information Nation and head of the information governance practice at Forensics Consulting Solutions LLC.
“[S]unlight remains the best disinfectant for problems in our capital markets.”
- Christopher Cox, former chairman of the Securities and Exchange Commission (SEC), June 2008
Back before the failure of Lehman Brothers, the ouster of John Thain from a combined Bank of America/Merrill Lynch, and before a new president said we were “facing the greatest economic challenge of our lifetime,” the SEC began working on an initiative to improve public company “transparency by making disclosure information more accessible and easier to use.”
This 21st Century Disclosure Initiative published a report in January that proposes, among other things, requiring “tagging” of financial information so it is more interactive and useful, and moving away from a document-centric paradigm. The intent is to modernize the way that investors receive information about the companies in which they invest.
This initiative, which may or may not have legs under a new SEC commissioner, raises some interesting issues for information management and corporate governance.
It will be difficult for the SEC — or anyone else — to “shine some sunlight” onto the financial and governance practices of corporations until the corporations themselves take control of their information.
Most organizations today struggle to understand where all their information resides, what it is, how to get to it, or how long to keep it. Witness the astounding numbers and ugly battles (like the e-discovery dispute centered around the SEC’s delivery of 1.7 million documents involving the SEC) that routinely arise when organizations are asked to dig up digital information — especially email and office documents — in the context of electronic discovery.
The reality for most institutions is that the most valuable information resides in the least managed locations. How many companies still rely largely on spreadsheets and email to comply with the Sarbanes-Oxley Act?
If my practice is any gauge, most of them.
Regardless of what happens with the SEC’s initiative, most politicos seem to agree that we are heading into an era of increased regulation under the Obama administration. I would recommend that organizations try to get ahead of what’s coming by looking at their current information governance practices with an eye to improving internal transparency — before someone steps in to make them do it.
To this end, perhaps it is time to revisit document retention and management practices. Here are some questions to think about:
- Are your valuable financial records being maintained in appropriate systems, or are there unmanaged copies in poorly controlled network drives and “drop boxes”?
- What do your email practices look like? Is email retention controlled? Do your employees export email out of the email system into unmanaged locations?
- How much important financial information (including the records that underpin financial information) resides in unmanaged, unsecured locations?
- Are you using your backup tapes for archiving purposes? If so, do you understand the potential cost and risk should those tapes need to searched for SEC investigations or litigation?
|Barclay T. Blair is a consultant to Fortune 500 companies, software and hardware vendors and government institutions, and is an author, speaker and internationally recognized authority on a broad range of policy, compliance and management issues related to information governance and IT. Blair heads the information governance practice at Forensics Consulting Service LLC, and can be reached at email@example.com or (403) 638-9302.|