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Bad Tone at the Top

What does Mercury Interactive tell us about Sarbanes-Oxley 404?

Ventana QuickTake™

The recent resignations of Mercury Interactive's Chairman/CEO, CFO and General Counsel stemming from their participation in shenanigans related to pricing of stock options and loans to officers may stoke the complaint that the Sarbanes-Oxley Act is ineffective. Ventana Research believes the situation illustrates both the strengths and weaknesses of the act in preventing fraud. We have never believed Sarbanes-Oxley could prevent all acts of fraud, particularly those stemming from concerted efforts by senior executives. On the other hand, most of what happened at Mercury Interactive predated the act; in 2002 the company implemented controls that would have been required to comply with SOX Section 404 and stopped the manipulation of options pricing. While preventing all high-level frauds is impossible, each that is uncovered adds to the list of material risk factors that companies and their auditors must address in establishing controls. In Ventana Research's opinion, these controls are likely to force board members, particularly those on the audit committee, to play more active roles in governance than they typically have. That would not be a bad thing.

About Ventana Research
Ventana Research is the leading Performance Management research and advisory services firm.  By providing expert insight and detailed guidance, Ventana Research helps clients operate their companies more efficiently and effectively. These business improvements are delivered through a top-down approach that connects people, process, information and technology. What makes Ventana Research different from other analyst firms is a focus on Performance Management for finance, operations and IT. This focus, plus research as a foundation and reach into a community of over two million corporate executives through extensive media partnerships, allows Ventana Research to deliver a high-value, low-risk method for achieving optimal business performance. To learn how Ventana Research Performance Management workshops, assessments and advisory services can impact your bottom line, visit www.ventanaresearch.com.

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