Corporate Governance in a Global Economy
The view from the boardroom
Running a corporation in the post-Enron era
When Jim Clark, chairman of online photo sharing giant Shutterfly, resigned from his company’s board of directors in January, he became the first CEO to blame the Sarbanes-Oxley Act for his departure, saying the law had taken reform too far and had crimped his ability to lead.
Here, the Bulletin asks corporate leaders and top lawyers for some views on managing in the era of Sarbanes-Oxley, heightened regulatory scrutiny and shareholder activism.
John C. Wilcox ’68 is senior vice president and head of corporate governance at TIAA-CREF. “Shareholders should have certain fundamental rights. I advocate strongly on behalf of majority voting in elections. Our system has basically held back on basic shareholder rights, such as the right to vote against directors, requirements for majority vote and the right to call special meetings. If these adjustments are made, shareholders are going to behave differently than they have in the past. I think the confrontational nature of the relationship between shareholders and companies in this country is the result of the way securities laws are written. That will change for the better and will become less confrontational as rights are more balanced and accountability is increased.”
Laura Stein ’87 is senior vice president, general counsel and corporate secretary of Clorox Corp. “Sarbanes-Oxley has generally had a positive impact on Clorox. It has helped enhance corporate governance practices and controls to protect shareholder value. Consumer packaged goods companies, like Clorox, have long acted in a manner to protect their reputations and brands in the eyes of consumers, and Sarbanes-Oxley has reinforced what companies already should have known—integrity in the tone at the top and doing the right thing will protect shareholder value. But Sarbanes-Oxley has also increased complexity and cost and has led to some non-value-added bureaucracy. I have spoken to colleagues in foreign companies who will no longer access the U.S. capital markets, and we also see many companies going private and more top executive talent being attracted to private companies, to avoid the cost and complexity of Sarbanes-Oxley.”
Gerald L. Storch ’82 became the chairman and CEO of Toys R Us in February 2006 after a dozen years at Target Corp. “If you are a disciplined company, then there is very little not to like about Sarbanes-Oxley’s rules. I don’t necessarily agree with every detail of the rules. But fundamentally I believe that following the rules and the kinds of controls mandated by the rules makes for a more disciplined operation and leads to better results, and that’s ultimately what matters.”
Deirdre Stanley ’89 has served as the senior vice president and general counsel of the Thomson Corp. since 2002. “I would hope, in enacting any new regulations, the SEC or Congress would do more of a cost-benefit analysis and ask whether this is something that will broadly address a kind of bad behavior or is something that may catch one or two bad actors but generally doesn’t minimize broader wrongdoing. What I hear identified as a problem with Sarbanes-Oxley throughout the halls of corporate America is that you can’t legislate against someone who wants to commit a fraud. They’ll find a way to commit a fraud or somehow manipulate information. Looking back to 2002, Congress felt it had to act. The SEC felt it had to respond. I think you had laws enacted without anyone knowing what the cost would be. The challenge and the frustration has been, as people looked at what it would require to comply with the letter of the law, that the cost has been beyond what anyone anticipated.”
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