This article originally appeared on the BeyeNETWORK.
Not so long ago, corporate financial statements were governed by independent accounting firms which followed GAAP and FASB standards. Investors were assured that they could rely on the financial pronouncements of the companies found on Wall Street. Indeed, thousands of companies for years faithfully and honestly made their quarterly reports.
Then along came Enron, WorldCom, Global Crossings and others. There was an element of dishonesty that arose in some areas of these companies. Some accountants’ dishonest financial misstatements created a black mark on big business. If you have paid attention for the past few years, you cannot help but notice that there is new legislation known as Sarbanes Oxley. The intent of Sarbanes Oxley is to restore the public’s confidence in business through strictly regulated financial reporting. If violations of Sarbanes Oxley occur, your executive management can go to jail for financial misrepresentation of the state of the corporation.
I am not one to cheer for more red tape. We have to deal with enough just to get through daily life. But Sarbanes Oxley and its requirements are red tape that is having a real impact. And as far as I can tell, that impact is very positive.
There are far reaching consequences of Sarbanes Oxley, some of them intended and some of them probably not. The intended consequence – that of having financial responsibility being taken by the officers of a company – is probably being met and in that regard the legislators have succeeded admirably. There are some other side benefits. One of these is that it is not so easy for the corporate officers to pander to the Wall Street analysts. And that can only be seen as a very good thing.
There is also another important far-reaching effect of Sarbanes Oxley, and that effect is that now – for the first time in many corporations – there is an awareness of the importance of the need for data quality and the need for enterprise information.
For years, Larry English and his followers have been promoting data quality. Their message has always been a legitimate one. But in most organizations data quality was pushed to the back burner. There simply was not a lot of impetus to get to be serious about data quality. There were always more pressing projects – Year 2000, eBusiness, ERP, etc. All these other projects were more glamorous than data quality. But now – with Sarbanes Oxley - data quality is required and is no longer an orphan project.
The other side effect of Sarbanes Oxley has been in the enterprise data arena. Prior to Sarbanes Oxley, many corporations simply never embraced the concept of enterprise data. There were excuses for not doing enterprise data. My friend Susan Osterfelt had a famous presentation she often made – “50 whining excuses for not doing enterprise data.” If you ever saw Susan do this presentation you would never forget it.
But in truth, for many reasons corporations neglected to have an enterprise data initiative. Some of the reasons why corporations did not embrace enterprise-wide data were:
- Politics. The main corporate objective is to appease the different organizations within the corporation.
- History. It has never been done that way before.
- Complexity. It is difficult to build the first integrated data warehouse.
- Cost. Funding is difficult to obtain.
- Technology. The existing technology doesn’t support enterprise-wide data.
Adding to this list of reasons for failure of the enterprise approach to data management were the software vendors for data marts and multi-dimensional technology. To some extent certain popular ETL vendors fostered the data mart approach, not the enterprise data warehouse approach. The data mart and multi-dimensional vendors wanted to sell their products, not build a real architecture. It was easy for corporations to listen to the data mart vendors who gave their own version of fifty whining reasons not to build a data warehouse. The multi-dimensional and data mart vendors gave this message “buy my product and you won’t have to build a data warehouse and have real enterprise-wide data.”
Through this smoke screen, Claudia Imhoff, myself and other notable industry leaders continued to describe a world of integrated enterprise data, even when other consultants were giving presentations such as “The Seven Deadly Sins of a Data Warehouse”. And from the hardware vendor side, Teradata has always been a strong voice for the enterprise perspective for corporate data.
Sarbanes Oxley changed all of that. It no longer is an option to not have corporate, enterprise-wide data. For those corporations that were told it is too difficult and expensive to have enterprise wide data, they are finding that they were misled. With corporate enterprise-wide data there are many benefits. Now the corporation can start to have perspectives about the corporation and its products that were never before possible. The corporation can now see both the forest and the trees, where before only the trees were visible. The entire corporation is benefiting from legislation. And in our litigious, red tape world, that is truly remarkable.
As final testimony to the power and impact of Sarbanes Oxley, consider this: how many people can name the party – Republican or Democrat – that proposed Sarbanes Oxley? It is a good bet that not one out of a thousand people could name the political origins of Sarbanes Oxley. I know I can’t. And isn’t that a great tribute to the Sarbanes Oxley enactment?
I feel it is time to stand up and embrace Sarbanes Oxley. It is a major step forward in helping to restore financial integrity and credibility to corporations world-wide.