Enron - corporate impact
Enron affair 'makes board vacancies hard to fill'
By Tally Goldstein in Boca Raton and Andrew Hill in New York
Published: March 3 2002 22:27GMT | Last Updated: March 15 2002 14:17GMT
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The Enron scandal may make it difficult for companies to fill vacancies on their board or audit committees, according to top US executives.

At their semi-annual meeting in Florida last week, members of the Business Council, an association of chief executives from some of the largest US companies, said the energy trader's collapse would make executives question whether the benefits of board membership outweighed the risks.

Shareholders and employees who lost their savings following the Enron collapse are suing directors. Four members of the Enron audit committee - Lord Wakeham, Wendy Gramm, Robert Jaedicke and, last week, Ronnie Chan - have given up public positions or directorships of other companies.

"I don't know a lot of CEOs who want to be on a board or audit committee right now because of the mob lynching," Scott McNealy, chief executive of Sun Microsystems, the network computer group, said during the Business Council meeting.

The Council's official two-day agenda, focusing on education and the country's future workforce, was overshadowed by discussion of recession, war and the Enron scandal, particularly its impact on the way businesses are run.

William Esrey, chief executive of telecoms group Sprint and chairman of the Business Council's executive committee, said he expected it would be much more difficult to fill an opening on Sprint's audit committee after Enron.

As expected, the committee's 70-year-old chairman, Warren Batts, will retire at Sprint's annual meeting in April. "You don't get a lot of volunteers," Mr Esrey said, adding that he could call in a favour or sweet-talk an old friend to take the position.

Mr Esrey, who is a director of General Mills, the food group, and energy groups ExxonMobil and Duke, said he was too busy to join another board.

Michael Armstrong, chief executive of AT&T, the telecoms group, said complex companies should consider different ways of running themselves.

Citigroup, of which he is a director, has an audit committee with two sub-committees, one for investment banking, and one for consumer banking and insurance. They meet separately then report to the main audit committee.

Mr Armstrong has sat on Citigroup's investment banking sub-committee for 10 years, but does not think AT&T requires the same breadth of audit supervision. Instead, AT&T is going for depth, Mr Armstrong said, pointing to the recent addition of an accountant from Deloitte & Touche as a director and audit committee member.

Chief executives last week welcomed the new era of corporate conscientiousness. But they were also quick to classify Enron and its problems as unique.

In a poll taken before the meeting, 68 per cent said they had not altered their companies' standard procedures in the light of the Enron debacle.

Many are worried, however, that a heavy legislative response to the scandal will add to the costs of doing business.



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