The Marketing Leaders - Is Sarbanes-Oxley really all bad for marketers?

Marketing Leaders can benefit from the wave of compliance initiatives. Ask most marketing directors at large multinational companies about Sarbanes-Oxley or other compliance initiatives, and the first reaction is likely to be a groan. Why?

The US corporate governance legislation has added significantly to the workload for nearly every function in large corporations. At a time when the marketing landscape is changing with unprecedented velocity brought on by channel proliferation, globalisation, data availability/overload, and communications regulations, the last thing marketing departments needed was to spend scarce time and resources on re-documenting processes and procedures.

However, forward thinking marketers are using the opportunity created by governance reform to make giant leaps in accountability for their teams, improve results, and better demonstrate their impact on company success.

SOX Background

Earlier this decade corporate accounting scandals decimated shareholder value at some of the world’s largest companies, including Enron, Parmalot, WorldCom, Ahold, and Tyco International. The Sarbanes–Oxley Act of 2002 (The Public Company Accounting Reform and Investor Protection Act, SOX or SarbOx) is a US law passed in an effort to restore public trust in the US financial markets.

SOX requires US listed companies to create and certify a full set of internal procedures ensuring accurate financial statements (Sec. 302), and to test the adequacy of, and adherence to, internal controls procedures (Sec. 404); this has required extensive and expensive efforts impacting all disciplines within companies, including marketing. Other measures, such as Regulation Fair Disclosure (Reg FD), have also raised the bar for corporate transparency and set restrictions on corporate communications.

Reforms have reached far beyond US listed companies - foreign markets have also raised standards, auditors have expanded their scope, lenders have increased their requirements on borrowers, and private companies have adopted some measures in order to be IPO or M&A ready.

While there is universal agreement that something needed to be done, there is nearly as universal sentiment that SOX needs to be re-examined. New York’s Mayor Michael Blumberg and US Senator Charles Schumer (NY) wrote “there appears to be a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth” (Wall Street Journal, 1st November 2006). The SEC has recently taken steps toward a middle ground, granting long extensions for small companies and newly listed companies (issued 15 December 2006) and issuing more concise guidance for internal controls testing (draft released 20 December 2006)

Under tremendous time pressures to meet strict compliance deadlines, many companies have taken a short term approach to meeting the new requirements. Marketing departments in these companies have, at a minimum, put in place:

With these forming some of the bare minimum requirements, it is no mystery why the wave of compliance/governance legislation has blamed for driving up costs, increasing administrative burdens, and providing limited benefits.

More forward thinking organisations are seizing the opportunity to re-think old methods and implement needed changes that simplify activities and drive better, more demonstrable results. These leaders view compliance is not a one time project implementation, but rather a logical extension of the operation and measurement of a successful marketing department. Compliance initiatives are driven by the CFO, and this has facilitated a dialogue between the marketing and finance teams on making needed investments in marketing technology solutions.

These solutions provide audit trails and compliance reporting as a by-product, while first and foremost helping marketing teams operate more effectively and efficiently. The focus on transparency and accountability has also increased the requirements on marketing programs to demonstrate ROI, and software solutions help to fill this critical role.

Best in class approaches start by laying out and communicating marketing strategies and goals, putting in place plans, workflows, and tracking mechanisms to execute and evaluate all of the elements. Here are some key ways to put technology at the center of initiatives to improve operational performance and meet compliance standards:

These technology solutions are available today, and internet delivered software as a service solutions can that can be put in place within weeks, unlike the enterprise systems implementations nightmares of years past. Marketers should view compliance not as a one time project, but as a natural by-product of an analytics driven marketing operations plan facilitated by technology. By taking advantage of the latest developments, marketers can put the focus back where it needs to be – uncovering and exploiting growth opportunities that build corporate value.

Tom Fogarty is the Managing Director of Advanced Marketing Sciences (AMS, www.amsciences.com). AMS sells marketing software and services that provides marketing directors with solid rationale for creating and executing more effective marketing plans. He has over 20 years experience in the technology sector, having held management positions with software, technology services and telecomm companies, including Axeda Systems, Ravisent Technologies, DecisionOne, and Bell Atlantic (now Verizon).

In his prior role at Axeda, Tom was Executive VP and CFO, responsible for Corporate and Business Development, Investor Relations, and finance and compliance at the NASDAQ listed firm. He has been a speaker on the topic of best practices in corporate governance and compliance, and has a Bachelors’ Degree in Accounting and an MBA from The Wharton School at the University of Pennsylvania.



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