Sarbanes-Oxley and the Corporate World:Part I
July 30th, 2010
In several articles written by Dennis Carey, the Sarbanes-Oxley Act of 2002 is mentioned. This legislation was initiated by U.S. lawmakers in response to the loss of confidence American investors were expressing at the time, in a fearful reminder of the Great Depression of the 1930’s. President George W. Bush signed the legislation almost exactly 8 years ago, on July 30, 2002, and within a short while was referred to as SOX.
To Be Continued…
Dennis Carey also points out that the contemporary trend for CEOs to stay in their position fewer years then the duration they were there in the past has added even more relevance to this corporate issue. Over the past several years the average length of a CEOs tenure decreased from about 8 years on average to even less than five years. Therefore, having a succession plan is an urgent issue that touches corporate life across the board.
Today boards discuss succession planning more than any other topic aside from making sure the current chief executive is the right one for the job. One probable reason that this subject is taken more seriously than it has been in the past is due to the provisions demanded by the groundbreaking Sarbanes-Oxley Act; the need to have “executive session” meetings, meaning that the board must meet without the executives present; the better to discuss their eventual replacement.
In the past ten years the issue of executive succession has become ever more important. All too often large, successful companies find themselves in crisis mode when, for whatever reason, the CEO must depart from his position. If a company has no well-thought-out plan about how to react to the departure of its leader, the company can be left in a precariously vulnerable position, creating uncertainty which can affect the company’s value and its ability to function efficiently.
In his book, ‘How to Run a Company: Lessons from Top Leaders of the CEO Academy,’ Dennis Carey discusses the role top executives have in a public company: “Despite the apparent public hostility to corporate executives, their role in a public company – particularly the role of the chief executive officer – has remained poorly understood. Indeed, one of the paradoxes of business press coverage of corporations is that while the personalities and wealth of CEOs have been exhaustively documented, there has been scant attention to what a CEO actually does. True, much has been written on the “leadership qualities” or “management styles” of corporate executives. But this literate is very different from a description of the day-to-day demands of a CEO: how he develops strategy, how he motivates employees, how he works with board members, how he deals with the investor community.”
In his book, ‘CEO Succession: A Window on How Boards Can Get it Right When Choosing a New Chief Executive Officer,’ together with his co-author Dayton Ogden, Dennis Carey takes his experience from “personal interviews and behind-the-scenes work with CEOs and directors of some of the leading companies in the world to articulate the field-tested strategies and techniques boards need to create a systematic and transparent planning process that promotes a seamless transition of leadership at every level in the organization. With an up-close look at such companies as Metropolitan Life, Hewlett Packard, Mellon Bank and GTE, CEO Succession shows how to put in place the key elements essential in the succession-planning process: establish and sustain a reliable succession agenda and timetable; implement a self-renewing succession culture that develops leaders at all levels of management; create a healthy relationship between the board and CEO that keeps the CEO on track; and benchmark internal candidates for CEO and other top posts with comparable outside leaders.”