Most of the nation's publicly traded companies that were required by the Securities and Exchange Commission to file statements by chief executive officers and chief financial officers have met last Wednesdays deadline to affirm that their corporations' financial reports aren't hiding anything.
We are confident that the vast majority of American businesses are on the up and up, but after Enron, WorldCom Tyco, Adelphia and those others that cooked their books, how can the public be sure that other corporate "r & eacute;sum & eacute;s" have not been padded?
The answer to that question is critical, given investor and consumer unease about the economy.
The statements filed by corporate officials were relatively short: each attesting to the best of his or her knowledge that relative to their own companies, "No covered report contained an untrue statement of a material fact as of the end of the period covered by each such report, and no covered report omitted to state a material fact necessary to make the statements in the covered report, in light of the circumstances in which they were made."
In requiring the statements, the SEC had two goals in mind, John Heine, deputy director of the commission's Office of Public Affairs, told The Vindicator. "The first to make clear as day the fact that the officers were personally responsible for the accuracy and completeness of the information they had filed with the commission. The second to provide assurance to investors that filings with the commission are reliable."
Most companies made the Aug. 14 deadline that was set at 45 days after the close of the second quarter. Delphi filed by July 18, for example.
But with the Dow closing out the week at 8778, down 40 from Thursday, it's hard to know yet whether the SEC's effort will have the desired effect of calming investors' jitters.
We fear that continuing announcements of layoffs, bankruptcies and eroding consumer confidence will offset whatever short-range gains are achieved by corporate pledges of honesty.
In the long run, however, truth-in-reporting pledges can help restore consumer confidence, but only if they are vigorously enforced.
Executives have put themselves on record as being aware of the practices of their companies -- something that should have been a given. The defense floated by Enron's Ken Lay -- that he didn't know how his company's books were being juggled -- is no longer available.