Relief as US chiefs come clean

THE STEADY stream of chief executive officer certifications into America's Securities and Exchange Commission since the 14 August deadline has turned up only a few nasty surprises but nearly 200 big firms, including many hi-tech giants, have yet to certify the accuracy of their financial statements.

Of the 761 companies that met the new deadline for their chief executives personally to certify past financial statements were true, only 12 declined to do so. The list includes chiefs at scandal-ridden firms such as John Sidgmore at WorldCom, whose books are under formal investigation. AOL Time Warner chief Richard Parsons certified his financial statements but at the same time disclosed $49m (£32m) in inappropriately booked deals.

The SEC's exercise in truthfulness unearthed problems at half a dozen smaller firms, such as Alaska Air Group and TruServe. The CEO of Chicago-based TruServe said she could not verify the accuracy of past financial reports from 1997 to 1999 because the company had 'inadequate internal controls'.

But the relatively small number of blue-chip executives who failed to meet the new guidelines relieved institutional investors who had feared a 'day of reckoning' with dozens of the most widely-held companies coming

clean. The SEC's goal is to reassure global investors about the quality of US reporting and to focus corporate America on instituting internal safeguards to protect against alleged accounting fraud that brought down Enron, Adelphia and WorldCom, among others.

Experts said the SEC is on its way to achieve that goal as most big firms on a calendar year format met their deadline with no bombshells. The remaining companies on fiscal calendars, including Microsoft, Hewlett Packard and Campbell Soup, have certification deadlines in the next few weeks.

'So far what we have seen is relatively minor stuff, except for companies like WorldCom and Adelphia and nobody expected them to certify,' said Patrick McGurn, vice president of Institutional Shareholder Services. 'That doesn't mean there won't be another Enron but we had expected dozens of companies to find major problems and so far the list is falling well short of that.'

Retail and institutional investors are heartened not only by the relatively smooth certification process but also by the dozens of big-name firms that have voluntarily announced that they will count options as an expense.

Critics have charged that excessive option packages skew a company's financial picture and encourage top executives to pump up profits. At many of the firms involved in America's corporate scandal wave, executives exercised options packages and sold millions of their personal holdings shortly before the public was made aware of their financial plight.

'At the moment it is a race to the top on accounting standards,' said McGurn, whose company advises some of America's largest institutional shareholders. 'Right now we have boards focused on this, chief executives, chief financial officers and even line-level employees focused on it.'