| Message Received |
7 April 2003
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US Companies Show 50% Rise in Audit Committee Meetings
While the ashes of Enron and HealthSouth are still cooling, there is action in the boardrooms of America to make sure that such things become rare as good television. The Financial Times has reported that meetings of audit committees is up by 50%. While it may not prevent fraud in the future, at least the directors are in a position to stop it.
The FT says that of the 30 companies in the Dow Jones Industrial Average, 24 have reported their boards' activities and audit committees have met 177 times last year compared with 119 in 2001. This can only be good for shareholders, workers, and the economy. More meetings means more time paying attention to possible crime, but institutional investors must do more.
"Who shall guard the guards?" is an old question, but it remains a vaild one. The auditor checks on the accountants, and the audit committee keeps and eye on the auditor as well as the CEO and the book keepers. However, there remains one group who aren't doing their bit, the shareholders.
While Aunt Agatha with her 1 share of stock is not in a position to do much, institutional investors with millions of shares are. They seem to have grown too comfortable, or have conflicts, or simply can't be bothered. In boom times, that attitude may not be harmful, but in times like these, it borders on negligence. They have the power to demand proper ledgers, they have the power to hire and fire, and they even have the power to sell stocks short and drive the price down as punishment for poor corporate governance. They need to get after it.