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 Executive Maurice Greenberg, speaking at the company's annual shareholder meeting in New York yesterday, spoke out forcefully against regulatory requirements of the Sarbanes-Oxley Act, complaining that the measure is unnecessarily expensive and time-consuming.[@@]

Mr. Greenberg also called parts of the Sarbanes-Oxley Act, the corporate-governance law enacted in 2002, "foolishness," pointing out to hundreds of shareholders attending the annual meeting that AIG now spends nearly $300 million a year to meet the regulatory requirements, according to the company spokesman.

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

The AIG spokesman related that Mr. Greenberg told the meeting some insurance executives now have two jobs, dealing with "the regulatory burden" during the day and running the company at night.

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

According to Susan McKenna, spokesperson for the Property Casualty Insurers Association of America in Des Plaines, Ill., Mr. Greenberg's sentiment is fairly common among insurance company executives. Ms. McKenna said that many in insurance management feel Sarbanes-Oxley requirements are too costly and burdensome, particularly because insurers are already heavily regulated compared to other industries.

The Sarbanes-Oxley Act?enacted in the aftermath of high-profile financial misdeeds at corporations such Enron and WorldCom?seeks to tighten internal accounting measures and hold company executives more responsible. The act is also designed to reduce the conflicts of interest among external audit firms and companies they audit and increase independence by board members.

By some accounts, Sarbanes-Oxley requirements have cost large insurers such as AIG millions of dollars, with audit fees rising 20-to-30 percent.

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Greenberg Calls Disclosure Law Costly Foolishness

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