Corporate Governance Gets Serious

Boards are under harsh scrutiny by regulators and investors looking for wrongdoing. CFOs are playing a critical role in implementing sound governance policies to guard against such concerns, both within their organization and when serving on external boards.

Paychex vice president and CFO John Morphy hasn't altered his approach to corporate governance much in the past three years. In December 1998, Morphy fought to make sure that the Roches-ter, N.Y.-based payroll processing and HR outsourcing firm filed its 10-Q on the same day it conducted its quarterly conference call and issued the accompanying earnings press release. "That was before Reg FD [Regulation Fair Disclosure]," he says, "but I thought we needed to do everything possible to ensure that all of our shareholders received all of our information at the same time."

Two years later, Morphy again demonstrated his commitment to effective reporting when he walked away from an outside board position he held with an Internet company. "There were a few things I asked them to do with regard to governance issues," he recalls, "and it became apparent that they weren't going to do them, so I resigned."

Morphy's decision to leave that company's board underscores the widespread shortcomings of corporate boards. Following Enron and the dismantling of Andersen, investors are questioning the quality of corporate performance reporting, and personal liability is becoming a critical concern for board members.

This atmosphere requires CFOs to rethink governance on two fronts. They are increasingly being asked to provide their financial expertise as outside directors, while at the same time they need to strengthen oversight in their own house. For both roles, they must keep a finger on the pulse of the governance debate.