The
Conference Board, Commission on Public Trust and Private
Enterprise1 was convened to address the corporate
scandals widely reported in the United States during
2001-2002 and the subsequent decline of confidence in
American capital markets. The Commission recommended
a series of principles and best practices in three major
areasexecutive compensation, corporate governance, and
audit and accounting issuesas they relate to publicly
held2 corporations and that companies can
adopt to improve their corporate governance.
The
egregious failures at Enron, WorldCom and other companies
evidence a clear breach of the basic compact that underlies
corporate capitalism which is that investors entrust
their assets to management while boards of directors
oversee management so that the potential for conflict
of interest between owners and managers is minimized.
Furthermore, various professional advisors of companies,
such as public auditors, compensation consultants, and,
in some cases, law firms failed to provide truly independent
advice and professional judgment as they came to view
management, instead of the corporation, as the `client'.
In
the area of executive compensation, the Commission shares
the public's anger over excessive compensation, especially
to executives of failed or failing companies who may
have garnered substantial compensation even as their
companies and the retirement savings of their employees
have collapsed.
Another
major challenge to corporations and their leaders is
to create a `tone at the top' and a corporate culture
that promotes ethical conduct on the part of the organization
and its employees. |
