A Focus on the Rules
For years after SOX was signed into law, boards of directors and their audit committees were pushed into a mode of complying with the mandates. With attention shifted to compliance, considerably less attention was given by many boards to the kind of advice, counsel, and direction that brings greater value to the company and its shareholders.
For instance, after watching the spectacular failures of Enron, WorldCom, Adelphia, and others, many boards became more risk-averse. Later, other rules-based issues came to light, such as the problems of stock option backdating, where the financial media again had a field day. There were cases of executives illegally enriching themselves, misstating the financial statements, and filing improper tax returns. Whether because of a simple administrative issue such as a time delay between a board's granting an option and having paperwork completed, or management deceiving the board, directors had to pay attention to dealing with the backdating and its fallout. Related is the question of whether boards gave sufficient attention not only to the option granting process, but also to the integrity and ethical values of management and the related tone set at the top of the organization and its effect on the heart and soul of the organization, its leadership, and its people.
With boards having dealt with these kinds of issues, the pendulum began to swing back to providing value-added activities and better recognizing how to manage ...