A lot of pensioners lost their money in the Enron scandal. They wanted blood and the Sarbanes-Oxley Act gave it to them. Companies must begin to comply with the new amendments for their first fiscal year ending on or after Nov. 15, 2004.
The Record Industry and its Artists
There have been many accusations over the accounting practices employed by the record industry. That will stop now for all of the publicly traded labels. It will also stop for the one privately owned major label Bertelsmann. Even though technically Bertelsmann does not have to comply with the act (it only applies to publicly traded firms) and is not subject to its criminal penalties, Sarbanes-Oxley sets a standard known as best practice which potentially can be used against them in civil court down the road.
How can artists utilize this law? Let's take Courtney Love as an example. She has been battling the record labels for years, claiming they have been systematically cheating her of the full money owed to her.
After Nov 15th, her record label's books must be in order and must be able to provide her with an accurate statement of the true revenues, expenditures and pay outs regarding her music. Automatically, her proper reimbursement should come in.
The good news is it probably will.
But if she feels that there are still shenanigans going on, here is where it gets interesting.
Theoretically, Courtney can buy one share of stock in her label and then attend the next stockholders meeting. There, she can state that her experience with her own account with the company leads her to believe there is deception about. Then she accuses the entire board, the president and other executive managers of failure to comply with the Sarbanes-Oxley Act.
Remember, the requirement here is due diligence. Even accidental failure to comply subjects executive management to fines and jail time because they failed the diligence requirement. That requirement was a response to Enron's CEO's claim that he didn't know what was really going on. Today a CEO better know what's going on or they go to jail for recklessly exposing their company - and its stockholders - to unnecessary risk.
Article comments
1 - Phillip Winn
This would *so* rock!
You would think that in this age of electronic media, people would be happy to finally be able to easily track all of this stuff and get the money where it is supposed to go. Oh wait -- maybe *that's* why the artists tend to be much more in favor of electronic downloads than the labels!