The Hours Spent Nitpicking Come at a Cost
from November/December 2007
Does compliance with Sarbanes-Oxley and other regulations distract you from thinking about your company's future?
If you doubt it, let me tell you about the statue they want to build in London.
I think it makes us less competitive. That’s the main thing. I come from the U.K., and the joke there is that the City of London is going to erect statues to Sarbanes and Oxley because it brought the U.K. so much business. Anything that makes you less competitive is a real irritant, and Sarbanes-Oxley is one of those things that have gone too far. It’s nitpicking.
David Mathieson, 53
Vice President and CFO, Brady Corp., Milwaukee
Tennant Co.
There is no question that the regulatory environment is an increasingly difficult and expensive burden requiring substantial management resources that might otherwise be employed for greater benefit to our shareholders.
Donald L. Krahmer Jr., 49
Co-chair of the Technology and Business Practice, Schwabe Williamson & Wyatt PC, Portland, Oregon
Pacific Continental Corp.
Yes, it’s a distraction, and [Section] 404 [on internal controls] is a major concern for me because we’re a smaller company. The current requirements are not consistent with the need. Putting large-company standards and compliance requirements on smaller companies is unrealistic, and the cost-benefit ratio is way out of line. I’ve personally discussed this issue with Senator Sarbanes, and he indicated that the law allows for different treatment for smaller companies. However, the regulators have not found it appropriate, yet, to give some realistic relief. It may require legislative action, which I understand is being proposed or considered.
E. P. Marinos, 65
Chairman, Arrhythmia Research Technology Inc., Fitchburg, Massachusetts
If you look at the endless amounts of time we spend on this, often on nitpicking stuff, it really distracts us from being able to focus on the bigger issues—the strategic issues—of the company, the long-term planning. It’s frustrating to see us waste millions and millions of dollars and all those man-hours. It’s excessive regulation put in by a bunch of people who don’t have a clue about how companies are really run. They should have aggressively pursued and prosecuted the people at the Enrons and the WorldComs, and put them in jail or whatever was appropriate, but not punish the whole world because of a few bad apples. It’s just ridiculous what that’s done to corporate America.
Larry K. Powers, 65
Chairman and CEO, Genlyte Group, Louisville, Kentucky
Sarbanes-Oxley did distract for a couple of years but is now part of the culture of companies and embedded in processes. The new disclosure regulations on executive compensation did, however, consume an inordinate amount of time and consulting fees this past year. We provided a lot more data, but I’m not sure we provided any additional information that is helpful.
Earnest W. Deavenport Jr., 69
Former Chairman and CEO, Eastman Chemical Co., Kingsport, Tennessee
Acuity Brands, King Pharmaceuticals, Regions Financial
Given the workload of director service these days, have you had to cut back on other things you used to do?
Well, yes, starting with sleep.
From my perspective, the job of director takes 200 to 300 hours a year. Sometimes it could be more. It’s seldom much less than 200 hours per year. I’ve cut back on some nonprofits.
Roger D. Peirce, 70
Former CEO, Super Steel Products Corp., Milwaukee
Allete Inc., Brady Corp., Journal Communications Inc.
I’ve had to cut back on sleep. There is no question that the workload has increased. There are more committee and board meetings, and the schedule has lengthened considerably. We now meet from seven-thirty in the morning until six in the evening and come in the night before for additional presentations. But I participate in four nonprofits, and I just can’t give them up. I made mine and it’s important to make sure you give back, no matter how much time
it takes.
Richard A. Reck, 57
President, Business Strategy Advisors LLC, Hinsdale, Illinois
Advanced Life Sciences, Interactive Intelligence, Merge Technologies
The workload forces greater engagement. It demands more focus. So you cut back on the number of boards you can consider being on, and you also cut out other things to make time for it. Every time I get a board book, that shoots most of a weekend. I used to enjoy playing with some of the animals on my farm, but I’m not as engaged there anymore.
G. Chris Andersen, 69
Founder and Partner, GC Andersen Partners, New York City
Millennium Cell, Terex Corp.
Has it hurt my golf game? Certainly. More important, 20 years ago I’d have said there was no limit to the number of boards I could sit on—but that’s just not so now. Given the logistics of getting to meetings and the amount of material you need to go through, there is a limit to the number of boards you can serve on and still be effective. To be an active board member, I’ve had to cut back on some of the boards and commissions I sit on.
David L. Porteous, 54
Attorney, Porteous Law Office PC,
Reed City, Michigan
Huntington Bancshares Inc.
I haven’t reduced existing commitments. But I’m busier than previously, and have turned down new commitments. Directors are busier because of the greater awareness and willingness of boards and management to adopt governance best practices. Each board on which I sit consists of committed and responsible directors who are curious as well as determined to ensure that companies are being effectively managed for the benefit of all shareholders. Boardrooms have transitioned from receivers of management reports to active participants.
Joe F. Hanauer, 70
Principal, Combined Investments LP,
Laguna Beach, California
MAF Bancorp, Move Inc.
I used to be on as many as nine company boards. I went down to six, and then two. The amount of effort—pre-meeting work and so on—is growing and becoming more and more detailed, and consequently more and more time is spent. I’ve been on audit committees, comp committees (which are getting almost as complicated as audit committees), and then, depending on what’s happening in the company, the governance and nominating committees, which can be busy as well. You just allocate the time needed. You find the time. The things that suffer are personal time and hobbies. But you take on a commitment and obligation, and you need to honor that.
Arthur L. Money, 67
Former Assistant Secretary, U.S. Department of Defense, Washington, D.C.
Intelli-Check, Terremark Worldwide Inc.
If you’re doing it right, board service requires a significant amount of attention, and that takes time. So do you sacrifice and take time away from your family or other recreational activities? Of course. But we enjoy being directors or we wouldn’t do it. I have 20 grandchildren, and my whole family would say I’ve had to sacrifice family time.
Francis R. McAllister, 65
Chairman and CEO, Stillwater Mining Company, Billings, Montana
Cleveland-Cliffs Inc.
