Executive Decision - March/April 2008 - (Page 31)

R and standards. eforms in the aftermath of the highly publicized gut-wrenching corporate abuses of the Enron/WorldCom era have finally taken hold in Corporate America and have led to a new phase based on transparency, Meanwhile, tax, accounting and regulatory requirements have proliferated and grown more complex. “The issue is not simply about rational executive pay, but encompasses the broader issues of competitive, vibrant and accountable corporate management. Today, an organization’s executive compensation has become a litmus test regarding corporate governance and a c c o u n t a b i l i t y, ” Tauber says. “ Tw o t h i n g s h a ve o c c u r re d t h a t m a ke t h e a t m o s p h e re fo r disclosure and disclosure and pay for performance. In the wake of the malfeasance era, a new buzzword has emerged in the corporate vocabulary—transparency. Transparency is based on the concept that information disclosed about corporate activities in a timely manner is a “best practice” for corporations. Typical examples of transparency include: I Expanding financial information guidelines transparency different than in the past,” comments University of I Prohibiting certain types of compensation. I Setting up independent boards to monitor ethical compliance. I Full disclosures of executive compensation and ownership of shares and stock options. I Penalties for false and misleading reporting. “The current climate on Capitol Hill and in boardrooms is to try to achieve as much transparency as possible particularly to try to address the requirements of the SEC (Securities and Exchange Commission). People have had their eye on the ball for a while,” says corporate attorney Alan L. Dye, a partner in the Washington, D.C., firm of Hogan and Hartson, and a former special counsel to the chairman of the SEC. Seemingly endless groups scrutinize the executive compensation system. Proactive institutional investors and other shareholders, media, government, employee organizations, customers and even vendors are all asking increasingly tough questions about how much senior executives are paid, according to Yale Tauber, program director for the Conference Board’s Executive Compensation Conferences and the principal of Independent Compensation Committee Adviser. “There is no consensus whether you can blame non-performance on the company or the executive.” Chicago Professor Steven Kaplan. “Boards are far more aggressive than they have been in the past on compliance and fraud-type issues and the audit committee hires the auditor and not the CFO.” “Most responsible companies are trying to and are going to comply,” says Professor Jay W. Lorsch of Harvard University. “Clearly, we have put safeguards in place.” Two Major Building Blocks The key reasons for the rise in corporate honesty are the two building blocks that form its foundation—the Sarbanes-Oxley Act (SOA) of 2002 and the amendments to the disclosure requirements for executive and director compensation adopted by the SEC in 2006. Sarbanes-Oxley established new or enhanced standards for all U.S. public companies, boards, management and public accounting firms. It contains 11 sections ranging from board responsibilities to criminal penalties. It established a quasi-public agency–the Public Company Accounting Oversight Board–which is in charge of overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors EXECUTIVE DECISION I March-April 2008 31

Table of Contents Feed for the Digital Edition of Executive Decision - March/April 2008

Executive Decision - March/April 2008 Contents Index of Advertisers Contributing Editors From the Editor's Desk Publisher's Note You Be the Judge - Unionization Thought Leader - Pitney Bowes Management - Flying High for Long-Term Results Strategies - Sovereign Wealth Funds Cover Story - In Whom Do We Trust? The Movement for Greater Accountability & Disclosure Finance/Legal - The New Boycott Model Green At Work - Transforming for Sustainability Technology - Embracing Risk Leadership - Executive Reputation Management The Global Village - China Moves to Curb Prices Economic Profile - California Gold Rush Transformations - I Can See Clearly Now, The Brain Is Gone Marketing - Effectively Using Market Research The Bottom Line - Brands: A Shrinking Advantage or Shifting Advantage? Pulse - Pandemic: Not If But When SPECIAL SECTION - Living On the Green: Luxury Golf Destinations

Executive Decision - March/April 2008

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