Corporate scandals bring a new title to executive suite

  • Business
  • Thursday, 07 Aug 2003

NEW YORK: The market for corporate governance officer appointments is growing as companies jump on the better governance bandwagon. 

Some experts are wondering, however, whether this new title may go the same way as the chief knowledge officer, who stalked the corridors of corporate power during the Internet craze in the late 1990s, but has now either disappeared or been diluted. 

Officially, chief governance officers (CGOs) are supposed to improve the way company boards operate and relate to management. 

However, critics question whether this new brand of executive is just a cosmetic cover for companies who want to look like they are behaving differently without changing much. 

“Some companies are indicating to the marketplace that a new level of corporate governance is in place, others are giving in to a fashionable trend,” said Patrick McGurn, senior vice-present at Institutional Shareholder Services, which is a key adviser to institutional investors. 

McGurn recalled a recent meeting where a company executive was handing out business cards, realised they were the wrong batch, and replaced them with CGO title cards. 

“One card was clearly meant for the consumption of institutional investors, but was not the card he gave to family and friends,” he added. 

McGurn advises testing the CGO title by reviewing how many other titles - general counsel, corporate secretary, investor relations officer - the person has. 

Management experts term such senior executives “CXOs,” with the 'X' representing whatever fad dominated headlines that particular year. 

They fulfil an immediate need and then fade away, said Tom Stewart, editor of the Harvard Business Review, a monthly management magazine. 

So far, the numbers of chief governance officers are relatively small, with some estimating only 30-60 so far carrying the title at publicly traded companies. 

However, the hype around CGOs far exceeded their number, and the announcement of a company CGO appointment was usually done with much fanfare, said McGurn. 

Tyco International Ltd. and Walt Disney Co. both appointed CGOs to handle good governance campaigns. 

Tyco faced a massive corporate scandal following the charging of its former CEO Dennis Kozlowski with securities fraud. 

Meanwhile, Disney had often bottomed corporate governance charts because of the way CEO Michael Eisner had dominated his board. 

But Julie Daum, North American board services practice leader at head hunter Spencer Stuart, who worked with Tyco to find an appropriate person to fill the CGO slot, does not think Tyco is a good example of CGOs going mainstream. 

“Tyco needed to prove something to the world,” she said, and does not see many companies following suit. 

Sunoco Inc., which ranks fifth among investor advisor Institutional Shareholder Services’ top 10 companies in corporate governance, has consistently focused on corporate governance and adding a governance title is just icing on the cake, according to CGO Ann Mule. 

Mule took on the title of CGO in addition to her two other titles of assistant general counsel and corporate secretary over the past year. 

“I think there is great value in the same individual performing both roles,” she said, referring to her CGO and corporate secretary responsibilities. 

In reality, however, Mule is doing more of the same, she says. 

Her team of two lawyers and a paralegal have been on over-drive over the past year getting a handle on new regulations. However, neither her staff nor her budget have increased.  

Nevertheless, Mule insists Sunoco’s CGO is a permanent executive title change. – Reuters 

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