Phoenix (July 26, 2004) -- When it comes to corporate governance best practices, public companies are substantially ahead of private firms, according to a recent survey of finance executives at public and private companies.
Public companies are making substantial investments to improve the audit committee process. Nearly half of public firms invested more than $400,000 in corporate governance compliance last year, while eight companies invested more than $1,000,000, according to a survey by the Financial Executive Research Foundation, the research affiliate of Financial Executives International and The Board Institute, a provider of Web-based board assessment tools.
"This is one of the few times where public organizations have an innovative lead over private companies," said Mark R. Edwards, chief metrics and behavioral research advisor of The Board Institute. "Because public companies are subject to Sarbanes-Oxley and shareholders are demanding adherence to the law, public organizations show a faster adoption of corporate governance."
Only one-third of the private firms that responded have chosen to apply the new regulations, according to the report.
But while companies are increasingly demanding strong corporate audit committees, most don't measure committee performance, according to the survey. While the overwhelming majority of public companies (96 percent) believe that their audit committees are effective, one-third don't evaluate committee performance. Likewise, the survey of FEI members found that about two-thirds of private organizations think that their audit committees are effective, but only 14 percent evaluate committee performance.
Respondent comments revealed that board evaluations currently consist of a survey of board members themselves, with only a few organizations using a corporate governance committee or other source to provide a more independent assessment of committee performance.
-- WebCPA staff
