What is SOX?

There has been lots of talk about SOX compliance, SOX 404 project and the Whistleblower. But what is this actually?

The major corporate scandals in the USA in the early 2000s gave rise to the Sarbanes-Oxley Act (SOX), which targets to prevent misconduct and improve corporate governance practices. It applies to all companies, whose shares are listed on the stock exchanges under the jurisdiction of the U.S. Securities and Exchange Commission (SEC) – such as Metso, which is listed on the New York Stock Exchange in addition to the Helsinki Stock Exchange.
The goal of the SOX is to ensure the accuracy and reliability of published financial information, and therefore the main part of the legislation requirements deal with the proper administration routines, procedures and control activities.

The SOX requirements bind all Metso units everywhere in the world. Therefore actions required by the legislation are mandatory, and their implementation will be audited by internal and external auditors.

The largest SOX-mandated project at Metso is the SOX 404. It targets to implement the measures by which we will ensure the accuracy and correctness of the financial figures and other data we report in the financial statements.

In practice, this means that over 40 largest Metso units are currently minutely documenting the main processes used to produce key financial statement information. These processes include sales, purchasing, inventory, IT, financial management, among others. At the same time practices to monitor the accuracy of the financial information are being developed.

The SOX 404 project is proceeding in a tight schedule: The process descripttion work will be completed in the units by mid March. After that Metso's internal audit will test the control procedures. Based on the tests, the units will supplement the process descripttions and control activities. The documentation will be made available to the external auditors in August 2005 at the latest, and it will become part of the auditors’ statement about Metso for the 2005 fiscal year.

The SOX Act also requires that companies implement guidelines for the resolution of misconduct, and establish a confidential contact channel. For this purpose, Metso updated in September 2004 its guidelines for the prevention of misconduct and also published an internal training material package on the issue. In November, we opened the Whistleblower channel for the confidential reporting of misconduct. The service is run by EthicsPoint, an independent service provider.

The Whistleblower channel provides Metso employees with two cost free options to confidentially report actual or suspected violations of Metso's Corporate Governance and Ethical principles or other generally accepted business methods and management practices. The reports can be filed either on the EthicsPoint web site www.ethicspoint.com, or by dialing the country-specific toll-free number. The service is available in 21 languages.

In compliance with the SOX Act, Metso must also inform all its employees about the Whistleblower channel. For this purpose, a link to the EthicsPoint web site can be found on the front page of Metso intranets. The country-specific toll free numbers and the web information are also given on posters that have been distributed to all Metso units.