Following a recent 12-month extension, European corporate operations have until July 15, 2006, to comply with the demands of the U.S. Sarbanes-Oxley Act, which is driving increased control of, and compliance with, expense management processes on both sides of the Atlantic.
Initiating relevant processes, back-office systems and audit trails is proving more complex than it has in the United States. "It is harder in Europe because there are so many countries and a lot of different local processes," said Nadine Dewart, president-elect of the Association of Corporate Travel Executives and Belgium-based global travel buyer for DuPont. "It is a lot of work to align them."
Daunting as it may be, SOX is by no means the only manifestation within European travel management of the global push towards greater corporate governance and the intensified accountability and documentation that follow in its wake. The Basel II accord and Solvency II are creating similar levels of financial regulation for the European banking and capital markets, while proposed company law reform in the United Kingdom threatens to prove even tougher than SOX.
Corporate governance also is extending its tentacles into travel in other forms. American Express, which is preparing for a major strategic push on this subject this fall, is bracketing financial control alongside such responsibilities as traveler security, health and safety and the environment.
"All these have processes which need to be transparent," said Pieter Rieder, Amex vice president for multinational sales in Europe. "In Europe, there is a different emphasis on some of them."
The most pronounced of these is tracking and minimizing the environmental impact of travel programs, an issue heading rapidly for the center of European corporate radars but barely registering a blip as yet in the United States
(BTN, May 15). "Sweden, in particular, has made environmental accounting parallel with financial accounting," said Søren Schødt, chief executive of the Copenhagen-based expense outsourcing company EPostTrip.
Also receiving increased board-level attention is the issue of corporate manslaughter. According to Amex, laws making executives responsible for the deaths of employees, customers and suppliers have been tightened in Switzerland and France and are being drafted in the United Kingdom.
"This will be tested in a court soon, without doubt," according to Rieder. "One manufacturing client told me that more of its employees are killed while traveling on company business than die in its factories."
Rieder said corporate manslaughter legislation will demand companies show greater duty of care toward employees, compelling them to revisit policy and document procedures clearly. "Companies will ask questions like whether policy allows employees to avoid driving and stay in a hotel overnight if their meeting finishes after 6 pm," according to American Express director of industry affairs Bernard Harrop.
Dewart confirmed that corporate governance generally is assuming a more prominent place in European travel management thinking. "At every level, we are feeling the need to document what we are doing and be transparent," she said. "More and more, there is a need to explain. There is also much more awareness that we need the approval of the people in our company who are responsible for controls. There is also an awareness that what we do in travel has implications at different levels of the company. Before, we were implementing processes on our own without having to think about what those implications might be."
Harrop said governance issues like health and safety and environmental management will exert an increasing influence on travel long after the finite problem of SOX has been dealt with—but for now the U.S.-originating legislation is the number one challenge.
Not only do the European operations of American companies have to comply with SOX, but so do about 300 European companies quoted on the New York Stock Exchange and Nasdaq.
European companies with a U.S. listing have seen their auditing expenses climb 35 percent to make themselves compliant with the law. "It is more of a headache here than in the U.S. because we have to log different procedures in each country to deal with different tax regimes, such as value added tax rules and per diem regulations," said Schødt. "It has been extremely costly. We are not doing things differently than before, but we have to document more. It's administrative hell."
Neil Hammond, the Paris-based global travel manager for Schlumberger, is concerned that SOX could be interrupting travel programs because of the extra layers of administration that it adds. "As travel manager, I am trying not to go overboard and over-interpret SOX so that we end up with a negative impact on the program," he said.
Hammond also is concerned about pre-trip approval. "I am worried a traveler might turn up at the airport and find their reservation was never ticketed because the agency did not receive our confirmation of approval," he said. "The other problem is that waiting for approval can delay the ticketing process."
Hammond already has seen evidence that this can be costly. A recent study of bookings made by the company with pre-trip approval and those made without revealed the former were on average 6 percent more expensive and carried an agency transaction fee that was $10 higher.
As in the United States, European travel departments that found SOX easiest to handle have a consolidated payment card program and an automated expense management system. These create what Dewart called a "closed loop" of data and procedures that readily can be audited. Simon Nelson, European managing director for Redmond, Wash.-based Concur Technologies, claimed the increasing demand for compliance has pushed up interest in automated expense management in Europe. "Companies are telling us this is one of the leading reasons why they are deciding to automate," he said.
Sarbanes-Oxley requirements are good news for expense management system providers, but corporate travel buyers also acknowledge an upside. One optimist is Jo-Achim Hamburger, corporate travel manager for Electrolux, who had to produce numerous workflow diagrams to demonstrate the company can follow a comprehensive audit trail through the expense management system he has established.
"This has created a lot of work for us. We have found it very difficult to invest the time to comply," said Nuremberg-based Hamburger, "but it has helped because it has made our process more visible. We found the compliance already was there for those parts of the business where we have automated expense management."
Dewart has been through Sarbanes-Oxley compliance twice, first with her former employer, BMC Software, and then DuPont, and she too has detected value in the discipline it brings. "It is a good way to contact colleagues and check whether processes are still valid or need to be updated," she said.