New Corporate Accountability Measures Necessary

This week, Opportunity '08 takes a closer look at corporate governance and how the next president can protect the investments and retirement plans of millions of Americans by leading the effort to strengthen the roles of gatekeepers.

The Securities and Exchange Commission's investigation of Countrywide CEO Angelo Mozilo's stock sales, included in a probe of at least a dozen companies in connection with the subprime mortgage market crisis, is the latest scandal raising questions about corporate accountability.

Business experts say companies aren't doing enough to promote accountability, transparency and compliance; responsibilities that usually fall on "gatekeepers" -- corporate directors, in-house and outside counsel, and internal and external auditors. "Had the gatekeepers of Enron, WorldCom, and similar corporations been more effective, shareholders would not have suffered the huge losses they did," says Dick Thornburgh, who was the examiner in the WorldCom bankruptcy proceedings.

After such scandals as Enron and WorldCom, Congress hastily passed the Sarbanes-Oxley Act of 2002, or SOX, in an effort to protect U.S. capital markets and millions of American shareholders. "While SOX may have increased investor confidence in the short-term, ongoing compliance with its requirements, as well as the heavy fines imposed by the SEC, have proved extremely expensive for some companies," says Michael Missal, who served as lead counsel to Thornburgh in the WorldCom proceedings.

Thornburgh and Missal argue that the act's costs outweigh its benefits, yet the gatekeeper-related provisions still do not go far enough. "Board members should be required to participate in an initial orientation as well as in periodic continuing education, and the SEC should consider requiring attorneys to pass a competency examination before being permitted to appear before it," Thornburgh advises.

The other recommendations include an SEC inspection program to review corporations' financial statements and accounting practices, and the requirement that the board's compensation committee approve the compensation of all top-tier executives.

A full version of this proposal, as well as supporting background material, is available at

About the Experts and the Project

Dick Thornburgh is counsel in the Washington, D.C., office of Kirkpatrick & Lockhart Preston Gates Ellis LLP. Thornburgh served two terms as governor of Pennsylvania and was attorney general of the United States under Presidents Ronald Reagan and George H.W. Bush. From 1992 to 1993, he served as undersecretary general to the United Nations. He was appointed in August 2002 as examiner in the WorldCom bankruptcy proceedings.

Michael J. Missal is a partner in the Washington, D.C., office of Kirkpatrick & Lockhart Preston Gates Ellis LLP. He served as lead counsel to the examiner in the WorldCom bankruptcy proceedings and was appointed in 2007 as examiner in the bankruptcy proceedings of subprime loan specialist New Century Financial Corp. He previously served as senior counsel in the Division of Enforcement of the Securities and Exchange Commission.

Opportunity '08 aims to help 2008 presidential candidates and the public focus on critical issues facing the nation, presenting policy ideas on a wide array of domestic and foreign policy questions. The project is committed to providing both independent policy solutions and background material on issues of concern to voters.