A high-powered panel of big-hitting former executives, academics, and regulators is throwing its weight behind efforts to restore faith in corporate America, currently faced with collapsing confidence in the wake of various scandals, including Enron and Andersen.
The panel, launched in New York by the Conference Board, the business research group, aims to examine whether tough action is required in such areas as executive pay and stock option accounting. Pressure for change has increased greatly over the past few months, beginning in the immediate aftermath of the Enron debacle, and increasing as more scandals emerged, such as Xerox, Tyco, and Merrill Lynch.
The panel includes individuals such as Paul Volcker, the former Federal Reserve chairman, and Arthur Levitt, former chairman of the Securities and Exchange Commission. As outspoken critics of the continued erosion of ethical standards in US business and advocates of reform, their presence adds weight to the best-practice guidelines the panel aims to issue in September.
The Conference Board’s panel possesses a wide scope, looking at issues ranging from executive compensation, to auditing and accounting standards, conflicts of interest, and the relationships between lawyers, bankers, insurers, and corporations.
John Snow, chairman of rail and transportation group CSX, and Peter Peterson, chairman of the Blackstone Group and a former US secretary of commerce, will chair the panel. Other members include John Bogle, former chairman of the Vanguard Group, and Ralph Larsen, retired chief executive of Johnson & Johnson, the pharmaceuticals company.
Other initiatives for change have come from investors and money managers such as Warren Buffett, head of Berkshire Hathaway, and Bill Miller of Legg Mason, with the aim of arming outside directors on corporate boards with the requisite information needed to effectively question auditors and management.
The Business Roundtable, a lobby group for chief executives, has also issued corporate governance guidelines. It has however come under fire for the broadness of these guidelines and for its apparent resistance to reform.
The efforts to make reforms received an added boost recently when the US Senate banking committee approved legislation to impose stringent controls on the accountancy profession, most notably including a ban on auditors performing non-audit consultancy services for clients. Although it faces tough opposition on the Senate floor, the banking committee’s decision, combined with the recent scandals and the impending elections in November, has increased the pressure to legislate on the issue.
The Securities and Exchange Commission has also planned audit reforms, which it intends to implement if the Senate bill fails. The accountancy profession itself has concerns about some of the SEC’s intended measures and is expected to publicly voice its alarm in the imminent future.