SEC Rule Creates Opportunity for CIOs on Corporate Boards
When the Securities and Exchange Commission ruled last month that corporate audit committees must include an accounting expert, officials unintentionally created an opportunity for CIOs to play a critical role on corporate boards.
The rule, which was expected Jan. 26, is the SEC’s interpretation of the Sarbanes-Oxley Act, Congress’s response to the recent rash of corporate financial scandals. The rule says that audit committees of publicly traded companies must include five financially literate members, one of whom should be a “financial expert”?a professional accountant or CFO with experience preparing or auditing financial statements for such companies. Financial experts, the SEC hopes, will spot fraudulent or misleading reports and in the process help restore investor confidence.
However, financial savviness isn’t enough to ensure corporate integrity, say some corporate watchdogs. “Now that all the talk is about financial scandals, people are losing sight of the need for a wide range of expertise,” says Charlie LeGrand, technology practices director with the Institute of Internal Auditors, a professional association for corporate auditors based in Altamonte Springs, Fla. The American Institute of Certified Public Accountants, which lobbied to require five financial experts on board audit committees, acknowledges that the emphasis on financial expertise comes at the expense of other knowledge. They say this shortcoming could be alleviated by having other experts, like CIOs, on corporate boards?and possibly chairing a board technology committee.
Richard Hughs, a professor emeritus and former dean at the State University of New York at Albany School of Business, says one way CIOs can help is by advising auditors whether companies are spending their IT budgets wisely. More important, says Hughs, the CIO can help the auditors understand what kind of business data is contained in a company’s systems that they can use to fulfill their fiduciary responsibility.
As of now the SEC has no plans to require a technology expert to be on corporate boards. But, says LeGrand, forward-thinking companies already do (see “Get on Board,” Jan. 15, 2003). In the meantime, CIOs can start with their own company, helping their CFO understand how to use corporate systems to generate more accurate financial statements.
New Task Force Chairman Would Pump Up High-Tech Sector
One of the top advocates for high-tech policy in the new Congress is a former veterinarian who’s turned his personal interest in technology gadgets?from cell phones to pagers?into a full-time job on Capitol Hill. Sen. John Ensign (R-Nev.), a member of the Senate Commerce Committee, which handles much technology legislation, is now the new chairman of the Republican party’s Senate High-Tech Task Force.
The task force works with the high-tech industry on legislation that helps promote the development and use of information technology. At the top of Ensign’s agenda this year is to reinvigorate the struggling sector. Part of his plan is to provide tax relief for high-tech companies that bring jobs home from offshore.
He’s also planning to keep working on a set of perennial issues, including promotion of digital television and advanced wireless technologies, and protecting children from Internet pornography.
Ensign founded and operated the first 24-hour animal hospital in Las Vegas before being elected to the House in 1994. He was elected to the Senate in 2000. Among the laws Ensign has sponsored are the Aviation Security Enhancement Act, which mandates airport terminal buildings be modified to accommodate explosive detection systems for screening checked baggage, and the Dot Kids bill, which aims to create a “safe zone” for children on the Internet, free from pornography and other unsuitable material.