Elizabeth Kennan, chair of the Corporate Governance Committee between 1998 and 2006, and lead trustee of the Board of Northeast Utilities from 1996 to 2012, speaks about the Sarbanes-Oxley Act of 2002.
What led to the enactment of Sarbanes-Oxley?
The act was passed in response to the recent spate of corporate scandals and accounting abuses at public companies. It, along with certain related proposals of the New York Stock Exchange, which the SEC adopted in November, 2003, attempts to address perceived shortcomings in federal laws and regulations in a number of areas, notably corporate governance, financial reporting and auditing.
Has Sarbanes-Oxley changed the way NU does business?
Although the act has sweeping implications for public companies, their officers, directors and stockholders, there was not a major impact on NU because our corporate practices were already substantially in compliance with its provisions - and even exceeded the requirements in several areas. For example, the act has various provisions strengthening the role of the board but does not expressly require appointment of a lead director; nonetheless NU has had a lead trustee position since 1996. In addition, all of the members of our audit committee were independent of the company, as is now required by Sarbanes-Oxley. We also have routinely engaged in Board evaluation, which is also now a requirement.
Other changes we have implemented in compliance with the act include the certification of quarterly financial results by officers, making these individuals more directly responsible for our public filings; criminal and civil penalties will apply for violations. In the past, the non-management members met routinely, but we have determined to formalize this process. Now, the non-management trustees will be meeting at least three times each year, allowing discussion of issues without the influence of management members of the Board.
How is NU addressing the new rules relating to the independence of trustees?
Our philosophy hasn't changed due to the new rules, and an annual examination of each trustee's independence will be made to ensure that at least a majority of the members of the Board are independent. We have also adopted specific additional rules relating to charitable donations by NU to charities in which trustees are involved.
Has Sarbanes-Oxley solved the problems it set out to fix?
While the act took important steps in reforming the corporate governance platform, it's still the responsibility of management and employees to act honestly and with integrity. NU will continue to monitor promising practices of our peer companies and continually review our own governance practices to make sure they meet evolving standards.
Last updated as of 7/12/06
Printer Friendly Page