Philadelphia (Sept. 23, 2003) -- A new group geared toward helping audit committee members and the public companies they monitor meet their responsibilities under Sarbanes-Oxley could lower the costs of directors and officers liability insurance premiums for both public companies and independent directors, according to its founder.
Securities law expert Frederick D. Lipman, a partner at the law firm Blank Rome LLP and founder of the newly formed nonprofit Association of Audit Committee Members Inc., said he’s been told by insurance brokers that companies that pay to have their audit committee members join the association may be able to lower their D&O policy premiums, the Philadelphia Business Journal reported. Lipman reportedly said he’s been told that insurance underwriters may be willing to reduce premiums if a company works to educate its audit committee.
Driven by the accounting scandals and the subsequent corporate governance regulation overhaul, Lipman estimated that annual D&O insurance premiums -- which can reach seven figures for medium and large companies -- have grown between 30 percent and 200 percent in recent years, the paper reported.
Lipman reportedly has invited the audit committee chairmen and members of more than 1,500 companies listed on the New York Stock Exchange to join the organization and has plans to contact NASDAQ member companies. According to the report, the annual cost to be part of the organization is $5,000 per committee, which Lipman said he expects the companies will pay. Company management won’t be allowed to join, since the audit committee members essentially are supposed to police management.
According to the article, Roderick M. Hills, the former chairman of the Securities and Exchange Commission and chairman of the audit committee at Chiquita Brands International Inc., has joined the board of directors of the association. The group has reportedly created an advisory board that includes two former SEC staff accountants.
-- WebCPA staff
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