School of Business > UPDATE > Fall 2002 > Article

Surviving the "Storm"
Directors' Summit Examines Issues Behind the Headlines

SEC Commissioner Harvey J. Goldschmid shared his perspective on key corporate goverance issues.

"It simply is no longer acceptable to say, 'I didn't know...' or for a board to say, 'We were uninformed.' ... The real role of directors is to smell trouble, to ask questions, to ask questions again if they don't get satisfactory answers, and not accept mushy answers." J.T. Battenberg III Chairman, CEO and President, Delphi Corporation

Patricia Lipton of the Wisconsin Investment Board spoke to Art Smith of Keystone Travel Services during a break in the conference.

They came from 24 states and three foreign countries, almost 200 strong. They assembled for most of three days in the Fluno Center for Executive Education to learn about corporate governance.

Seldom has a conference been more timely.
As Mark Preisinger, director of shareowner affairs for the Coca-Cola Company, told the group, the past year has been "the perfect storm" in terms of a meltdown in how corporations operate. Each month has seen new allegations of mismanagement, even fraud.

The first Directors' Summit, a joint effort of the Executive Education unit of the School of Business and the State of Wisconsin Investment Board, was held in 2001 and explored how good corporate governance could contribute to the bottom line. It examined everything from executive compensation to evaluating board performance. The 2002 edition of the Directors' Summit also covered those topics, but the title of additional sessions this year highlighted the new reality: "The Need for Transparency to Restore Confidence in Corporate America," "Can Public Confidence Be Restored in Financial Service Providers?"

This year's conference attracted more participants from all over the U.S. and beyond. It also generated increased media attention. National coverage included The Economist.com, the Street.com, CNBC, Bloomberg News and the Wall Street Journal.

In addition to the timeliness of the topic, attracting attention was the high profile of many of the conference presenters. Harvey J. Goldschmid, who had been confirmed as an SEC commissioner only a few weeks earlier, gave the SEC's viewpoint on corporate governance and announced at the summit that the SEC would focus its resources on addressing Wall Street's conflict-of-interest problem.

A unique perspective was offered by Joseph F. Berardino, who was in the eye of the hurricane as CEO of Andersen Worldwide. Berardino resigned from the firm in March after the accounting firm's handling of the Enron account came under scrutiny. He spoke about what he feels proposed accounting reforms can and cannot do to change the way corporations operate. "Corporate governance, in my words," Berardino said, "is all about the conversation between management and investors. The real question is: Are we asking the right questions?"

Ted Beck, associate dean of executive education, said he felt having Berardino be part of the discussion was valuable because, "Companies need to be more focused on risk management and identifying risk factors on the front end of transactions." According to Beck, approximately 80 percent of those who attended were senior corporate officers; the remaining attendees were independent board directors, academics and others interested in corporate governance.

Patricia Lipton, executive director of the Wisconsin Investment Board, which co-sponsored the conference, said reaction to this year's conference was extremely positive. "Institutional investors have a fiduciary obligation to safeguard shareholder rights," she said. Cynthia L. Richson, director of corporate governance for the Wisconsin Investment Board and co-creator of Directors' Summit, said continuing education for corporate directors has taken on an even greater importance in light of new proposed New York Stock Exchange and Nasdaq listing standards requiring director education.

Among those who attended the Directors Summit was UW-Madison Chancellor John Wiley, who said he was pleased to have the university play an important role in corporate reforms. "Improving corporate governance is crucial to the economic strength of our country," he said. "I'm pleased we've been able to help focus the discussion."