Wednesday, October 13, 2004

An Overflow of Experts

Sarbanes-Oxley has pushed boards’ use of independent experts to a whole new level. There are a lot more of them, and they’re being called upon in circumstances that in the past would have been either handled by insiders or ignored altogether.

“For years directors have brought in outsiders to opine about merger-and-acquisition transactions,” says Duke K. Bristow, an economist at UCLA’s Anderson School of Management. “What Sarbanes-Oxley has changed is the number and visibility of issues where directors feel the best process requires an outside opinion.”

A recent survey by the National Association of Corporate Directors found that 42.5% of board governance committees are hiring outside consultants to coordinate and lead the search for qualified directors, up from less than 15% two years ago. “That large an increase is absolutely staggering,” says Roger Raber, the NACD’s president and CEO. Boards are using outside experts for a multitude of purposes, but the most pressing need for them is to make sure directors have a complete understanding of Sarbanes-Oxley regulations. In the Corporate Board Member/ PricewaterhouseCoopers survey of directors, 67% say they agree with the Sarbanes-Oxley “requirement that the external auditor assess the effectiveness of the audit committee’s oversight of the external financial reporting process.” And 70% support “the requirement that the external auditor assess the effectiveness of the audit committee’s oversight of the internal control over financial reporting.”

An Overflow of Experts

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