Scrutiny Sparks New Calls for Governance 'Top Dogs'

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Amid heightened investor scrutiny, some U.S. companies are choosing to name a specific executive to carry the corporate-governance load.

At Tyco International Ltd. the still-evolving post has the title of senior vice president of corporate governance, while at Computer Associates International Inc., it's director of corporate governance. But in each case, the effort is part of the company's answer to its own governance problems.

Other companies are pushing to reorient the corporate-secretary job by strengthening its focus on governance. And at least one major corporation, Pfizer Inc., has had a governance official for years, well before the surge of interest in such a position.

At first blush, the appointment of a governance top dog may seem superfluous: Governance is, in some way, part of every senior executive's job. But for some companies, the thinking now is that making a single person responsible for its oversight underscores a corporation's resolve to ensure that good practices prevail.

Recent corporate scandals have led to increased scrutiny of how companies are run, leading to debate on issues such as the role of audit committees, possible conflicts of interest on the part of directors, executive compensation, communications with shareholders, and whether the offices of chairman and chief executive should be separate posts. A governance executive can help represent his or her company in the forums where these issues are debated, feed information back to the company's management and board, and push for changes when appropriate.

"I've been promoting this for a number of years," says Richard Koppes, a lawyer in Sacramento, Calif., and the former general counsel for the California Public Employees' Retirement System, the nation's largest public pension fund. "I think it's a way to institutionalize the issue of corporate governance within a corporation."

Pfizer agrees. The New York-based drug maker has 15 employees in its corporate-governance department, says Margaret Foran, Pfizer's vice president of corporate governance. Ms. Foran, a former J.P. Morgan corporate lawyer, has held the governance post at Pfizer since 1999. Last year she was also named Pfizer's corporate secretary. And she is the second Pfizer executive to hold the governance post, following in the footsteps of Terence Gallagher, the longtime head of the department who built a reputation as a corporate-governance guru during his years at the company.

Ms. Foran says having a commitment to corporate governance has helped the company stand out when competing for investors and when seeking new talent. "You want to work for a place that has integrity," she says.

For most companies, however, only recently has governance received so much attention. At Computer Associates, the creation of a corporate-governance position was part of the company's response to controversy. In the past, the Islandia, N.Y., software maker has been bruised by criticism of its executive-compensation practices and by a high-profile fight with a dissident investor over nominations to its board. Recently, Computer Associates has also faced an investigation into its accounting by the Securities and Exchange Commission and the U.S. Attorney's Office for the Eastern District of New York. A spokesman for the company says that Computer Associates has been cooperating with the inquiries but that it believes its accounting practices were appropriate. The SEC and the U.S. attorney's office both declined to comment.

Computer Associates says it has committed itself to high corporate-governance standards, in part by electing to its board heavyweights such as Walter P. Schuetze, a former Securities and Exchange Commission chief accountant. And in late October, the company named Robert Lamm as its corporate secretary and to the newly created governance post.

Formerly a corporate-governance attorney in private practice, Mr. Lamm has been on the job for only about four months at Computer Associates. Mr. Lamm says he has been doing "an awful lot of reading" as he surveys the governance literature. He also has been keeping a close eye on the "extensive rule making" that has followed the recent corporate scandals. Mr. Lamm monitors what other companies are doing in such areas as determining who is and who isn't an independent director.

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