Coca-Cola Co and Eastman Kodak Co are among more than 50 US companies objecting to a Securities and Exchange Commission (SEC) plan to speed companies' financial disclosures as a response to Enron Corp's bankruptcy.
The SEC rule proposal, which is being pushed by Chairman Harvey Pitt, would give investors faster access to quarterly and annual earnings reports of company finances. Quarterly reports would be required within 30 days of the end of the quarter, rather than 45 days, and annual reports within 60 days of the end of the fiscal year, instead of 90 days.
At least 50 companies in the Fortune 500 and the four biggest US accounting firms have urged the SEC to drop or scale back the proposal, which has won investor support after being issued for public comment in April. The corporations say the pressures from tighter deadlines would lead to erroneous and incomplete reports at a time when the SEC is pushing for fuller, more accurate disclosure.
"The corporations have very valid concerns, and I think the SEC will give great weight to their comments," said David Martin, a Washington lawyer who headed the SEC's corporation-finance unit from January 2000 to January this year. "But while the SEC may compromise on the deadlines or the timing, I'd be surprised if they drop the proposal."
Facing pressure from Congress and investors, Pitt has advocated fuller and faster disclosures to protect stockholders from the kind of accounting failures that led Enron to file for bankruptcy on Dec. 2 last year. The SEC also has opened dozens of accounting investigations in recent months, including probes of Global Crossing Ltd, WorldCom Inc and Dynegy Inc.
The Council of Institutional Investors, which represents pension funds overseeing US$1 trillion in assets, supports the SEC's plan.
"It is vitally important for council members to have timely access to clear and transparent financial information about portfolio companies," the group said.
In comment letters to the SEC, companies questioned whether faster disclosures would have protected investors from Enron's use of off-the-books partnerships to hide more than US$1 billion of losses.
"We do not recall having read a single criticism of the timeliness of Enron's financial statement filings," said Howard McLure, chief financial officer of Caremark Rx Inc, which manages prescription plans for insurers and employers. "We have, however, read many thousands of words devoted to their accuracy."
Companies called on the SEC to drop or at least soften the disclosure proposal, with most concern expressed about the deadline for quarterly reports. Some companies suggested a compromise deadline of 40 days after the end of the quarter, rather than the proposed 30 days.
Coca-Cola, the world's largest soft-drink maker, said it may not be able to process information in time to meet the tighter deadline, especially from operations in less-developed countries lacking modern computer systems.
"Our company still has significant challenges in collecting and properly analyzing data," said Connie McDaniel, Coca-Cola's controller.
Kodak Controller Robert Rozek said, "The proposed accelerated timeframe would have a negative impact on the quality of information reported" by the largest photography company.
Other companies that criticized the SEC proposal include McDonald's Corp, the world's biggest restaurant chain; ChevronTexaco Corp, the second-largest US oil company; American International Group Inc, the world's biggest insurer; J.P. Morgan Chase & Co, the second-largest US bank; and Pfizer Inc, the world's biggest drugmaker.
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