A Hung Jury
from What Directors Think 2003
SURVEY SAYS: Eye Off the Prize
36.8% say they don’t know whether Sarbanes-Oxley has distracted management to the point that it’s hurting the company’s performance. 13.9% say that it is hurting.
You can’t regulate everything, and regulations in the complex world we live in today almost always have unintended consequences that can sometimes be severe. So I think we need to be careful. That said, I do think that something had to be done, and has to be done, in light of the very serious breaches in public and investor confidence that have occurred recently. My solution would be to put the offenders in jail, where they belong.
Gerry Meyers, 53
President, CEO, and Director, Century Aluminum Co., Monterey, California
They have gone far enough. My concern is an overreaction to the regulations. I worry that corporations will pull in their horns too much and not take risks.
Travis W. Bain II, 69
Chairman, Texas Custom Pools, Plano, Texas
Atmos Energy
I don’t think they’ve gone too far, but they’ve gone far enough. Sarbanes-Oxley is a good piece of legislation that has improved communications between management and their boards.
John H. Dalton, 61
Former U.S. Secretary of the Navy; President, IPG Photonics, Oxford, Massachusetts
eSpeed, Fresh Del Monte Produce, TransTechnology Corp.
In some areas it’s a bit of overkill. For instance, I’m chairman right now of the audit committee at Hanover Compressor, and I’m really proud of the job I’ve done there. I’ve really worked hard on that committee. Yet it appears to me that under Sarbanes-Oxley and the new rules proposed by the New York Stock Exchange, I will no longer qualify to be chairman of the audit committee. That’s okay—nobody particularly wants to be on an audit committee anyway these days—but I think I was a really good chairman of the audit committee. I’m not an accountant, but I think I understand finance well enough to do my job. And I think most of the investors in Hanover would say, “I’m glad that man was chairman of the audit committee when he was.”
I. Jon Brumley, 64
Chairman and CEO, Encore Acquisition Co., Fort Worth, Texas
Hanover Compressor
The regulatory reforms are all useful and helpful and are a valid attempt to correct some of the problems. But I don’t think they’ve addressed the core issue, which is the independence of corporate boards. In my opinion, only when boards are truly independent of the management will you have a relationship that’s desirable in terms of running the company.
John W. Murrey III, 60
Visiting Professor, Appalachian School of Law, Grundy, Virginia
Coca-Cola Bottling Co. Consolidated, Dixie Group, US Xpress Enterprises
My concern is that the nature of regulations makes them look like a cookbook, with a lot of processes to be followed. But regulation never deals with the issues that underlie the problems. There ought to be more effort put into creating an ethical climate, because if you’re behaving ethically, you won’t run into problems that the Enrons and all the others have had. There’s not enough progress being made in the ethical arena. There are too many boards sitting back, doing business as usual. They ought to be playing a role in creating ethical cultures.
James A. Mitchell, 61
Executive Business Fellow, Leadership, Center for Ethical Business Cultures, Minneapolis
Great Plains Energy
Many of the reforms are heading in the right direction, particularly with respect to director independence and auditor independence. I think guidelines that put more arm’s-length distance between officers and their companies—for example, prohibiting loans to officers—have been very appropriate. In my company, Becton Dickinson, I think every director comes to board meetings a little more edgy. There are a lot more questions asked.
Edward J. Ludwig, 52
Chairman, President, and CEO, Becton Dickinson & Co., Franklin Lakes, New Jersey
Aetna
Sarbanes-Oxley has strained relationships in some ways. Now the outside directors meet without the CEO, and it tends to cause some paranoia because the CEO believes he or she should know everything. What we have done to combat some of the paranoia is to schedule a regular executive session at the end of every meeting. When the outside directors start meeting irregularly, I think the panic hits a CEO.
Dennis E. Logue, 59
Dean, Michael F. Price College of Business at the University of Oklahoma, Norman
Abraxas Petroleum, Waddell & Reed Financial
I think the regulatory reforms have done what they can do. To do more just isn’t warranted at this point. The reforms have addressed the main issues associated with public mistrust. To go beyond that, I think, would be punitive in a way that, long-term, could impact on the companies financially.
There are other issues we should look at. For one, I certainly believe there should be more choices of credit-rating and auditing firms. I’m not suggesting more legislation or regulation, but this is an issue that affects companies’ abilities to get a clear, independent thought process.
Paul L. Miller Jr., 61
President and CEO, PL Miller & Associates, St. Louis
Ameren
I believe regulatory reforms have gone far enough, and in the case of requiring attestations of internal controls, maybe too far. Sarbanes-Oxley has improved communications between the CEO and the board, but more importantly, it has improved communications between and among members of the board, both in meetings and in the periods between meetings. In my opinion, however, the attestation-of-internal-controls requirement is overly burdensome and costly and will do little more than provide a windfall for the auditing profession.
Nolan Lehmann, 59
President and Director, Equus II, Houston
Allied Waste Industries
A lot of it is feel-good legislation. And it’s probably a detriment to a certain extent, because you spend more and more time adhering to the letter of the law as opposed to the intent. You spend more time managing the regulators than you do managing your business. If you spend all your time with the referee, it’s awfully hard to remember which way the goal was. And unfortunately, legislation cannot make bad management into good management or bad directors into good directors.
Fred H. Johnson III, 42
President and CEO, Summitcrest Inc., Summitville, Ohio
Sky Financial Group
Yes, Sarbanes-Oxley went far enough, and some parts of it went even further than they should. But the thrust of it, given what it was trying to correct, did well. And in the new regulations from the SEC, the request for an executive session of independent directors without management present is one of the best of all reforms, because it allows independent directors to discuss freely what’s on their minds.
Barbara Hackman Franklin, 63
Former U.S. Secretary of Commerce; President and CEO, Barbara Franklin Enterprises, Washington, D.C.
Aetna, Dow Chemical, GenVec, MedImmune, Milacron
For the most part it has improved communications. For example, board members tend to not just pass certifications by the CEO; instead they go through them much more carefully. There’s a greater focus in the boardroom on the intent of the law as well as the letter of the law.
George Heilmeier, 67
Chairman Emeritus, Telcordia Technologies, Dallas
Inet Technologies, TeleTech Holdings
Sarbanes-Oxley is fine. Did it go far enough? No. I think that when a director is up for election, he ought to have to make a statement outlining what contributions he’s made and could make to the company, and invite questions from the shareholders. I serve on the board of an Australian health-care company called Ansell Ltd., and that’s what I had to do. Every one of its directors, when standing for reelection, makes a three- to five-minute presentation at a shareholders’ meeting. Then they face questions from the shareholders. It’s a very good, very healthy process. It reminds the directors that it’s the shareholders they’re accountable to, not the CEO.
Stanley P. Gold, 61
President and CEO, Shamrock Holdings, Burbank, California
Ansell Ltd., Tadiran Communications, Walt Disney Co.
