Greenberg Calls Disclosure Law Costly Foolishness

By Michael Ha

NU Online News Service, May 20, 3:59 p.m. EDT?The American International Group's Chairman and Chief ExecutiveMaurice Greenberg, speaking at the company's annual shareholdermeeting in New York yesterday, spoke out forcefully againstregulatory requirements of the Sarbanes-Oxley Act, complaining thatthe measure is unnecessarily expensive and time-consuming.[@@]

Mr. Greenberg also called parts of the Sarbanes-Oxley Act, thecorporate-governance law enacted in 2002, "foolishness," pointingout to hundreds of shareholders attending the annual meeting thatAIG now spends nearly $300 million a year to meet the regulatoryrequirements, according to the company spokesman.

In addition to extra expenses, there are also other costs interms of time spent by senior management and directors to meet newregulations, Mr. Greenberg pointed out.

The AIG spokesman related that Mr. Greenberg told the meetingsome insurance executives now have two jobs, dealing with "theregulatory burden" during the day and running the company atnight.

When one of the shareholders asked Mr. Greenberg whether thebenefits of the new law outweighed the costs, Mr. Greenbergreplied, "I don't think so."

According to Susan McKenna, spokesperson for the PropertyCasualty Insurers Association of America in Des Plaines, Ill., Mr.Greenberg's sentiment is fairly common among insurance companyexecutives. Ms. McKenna said that many in insurance management feelSarbanes-Oxley requirements are too costly and burdensome,particularly because insurers are already heavily regulatedcompared to other industries.

The Sarbanes-Oxley Act?enacted in the aftermath of high-profilefinancial misdeeds at corporations such Enron and WorldCom?seeks totighten internal accounting measures and hold company executivesmore responsible. The act is also designed to reduce the conflictsof interest among external audit firms and companies they audit andincrease independence by board members.

By some accounts, Sarbanes-Oxley requirements have cost largeinsurers such as AIG millions of dollars, with audit fees rising20-to-30 percent.