Public Dialogue Tour:
Dallas, Texas
Good corporate governance is increasingly important to investors, according to panelists at the CAQ’s latest Public Dialogue Tour event.
Charles Niemeier, a member of the Public Company Accounting Oversight Board, said market forces are rewarding companies with leadership that takes a long-term view. He said investors are rebelling against compensation packages that indicate misplaced priorities. “We have too many packages that actually give the CEO the incentive to make the money fast and run,” Niemeier said at a Feb. 5 tour stop in Dallas. “There’s a change out there…People are focusing on those issues.”
Other panelists agreed. James Keyes, chairman and CEO of Blockbuster, Inc., said he did not seek a severance package when he joined the company because he wanted to send a message that his interests are aligned with shareholders’ interests. Ross Perot, Jr., chairman of Perot Systems Corp., said investors should carefully examine the corporate culture before investing in a company.
Niemeier, Keyes and Perot joined Dan Short, dean of the M.J. Neely School of Business Administration at Texas Christian University in Fort Worth, in a wide-ranging discussion with an audience that included investors, academics and other market stakeholders. The event host, Cindy Fornelli, the CAQ’s executive director, and the local firm host, Barry Salzberg, CEO of Deloitte and member of the CAQ Governing Board, both made remarks during the event.
The Dallas event was the eighth stop on the national Public Dialogue Tour, which is gathering suggestions on ways to improve financial reporting.
Forum participants agreed that investors want more predictive information about public companies and suggested possible changes to financial statements. Niemeier said financial statements could give a clearer picture of cash flow and operating results. “In this country, we actually do numbers better than we do disclosure. I think that’s where we’re really going to have to step up as we move forward,” he said. “If we really want to communicate, we can’t just use numbers to do it. We have to actually explain.”
But Perot said the fear of legal liability makes corporate executives reluctant to offer predictive information. "Don't put liability around forward guidance for that CFO or CEO, where you go to jail if your forward guidance is wrong. That kind of penalty causes very conservative behavior," he said.
Keyes said he would like to see more timely information from companies. “As a CEO, I don’t want to be on an investor call 60 days after a quarter trying to explain something that’s now ancient history,” he said.
Panelists and audience members also shared their thoughts on U.S. competitiveness in the global economy. Perot said some foreign investors do not want to put their money in publicly traded U.S. companies because of concerns about compliance with the Sarbanes-Oxley Act and other regulatory requirements. "We need money from all over the world coming into this nation," he said. "Sarbanes-Oxley scares a lot of investors around the world. They don't understand it."
Niemeier said investors in U.S. companies benefit from regulatory standards and enforcement that offer far more protection than can be expected overseas. “The amount of risk outside the United States is far greater than anything we have here…They do not have the controls we have. They do not have the enforcement in place,” he said.
Most forum participants agreed that financial reporting and investor confidence have improved as a result of the Sarbanes-Oxley Act, but they also agreed that implementing provisions of the law has been diffic ult for some companies. Short said regulatory uncertainty continues to be a problem, despite efforts to improve the law’s implementation. “To me, that’s where the real cost comes in. I think the additional cost in terms of assuring that the information you have is reliable is a relatively small cost,” he said. Short also noted that it is much easier to quantify the law’s costs that it is to quantify its benefits.
For more information and video from the previous events on the Public Dialogue Tour visit http://www.thecaq.org/events/PDT/index.htm.
If you are interested in attending future events or if you have any questions please send an email to info@thecaq.org
