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Cox Provides Videotaped Remarks To Corporate Directors Forum

SEC Chairman Christopher Cox, in videotaped remarks to the January 31 Corporate Directors Forum in San Diego , said that he sees a rededication to ethical governance in boardrooms across America . He believes that directors and managers are focused on the integrity of their controls and their public reporting as never before. This focus on internal controls and financial reporting will not prevent future Enrons or WorldComs, he warned, because there will always be corrupt people. However, the SEC will use its rules and enforcement efforts to uncover and punish fraud, he said. Cox added that the SEC is always looking at the responsibility of directors and will bring actions when directors fail to fulfill their roles as guardians of the shareholders' interests.

Cox gave examples of two SEC actions involving directors, one against a former director of Tyco who collected a secret $20 million payment in connection with a Tyco acquisition. The director was barred from serving as an officer or director in the future and was ordered to pay $20 million in restitution. In another case, Cox reported that the SEC, for the first time, brought an action against an outside director for failing to take reasonable steps in connection with a financial fraud. The director knew his company's accounting for an acquisition was in dispute but failed to act. He too was barred from serving as an officer or director of a public company. Cox said the SEC will continue to police directors and will attempt to help foster an atmosphere where ethical standards are both desirable and rewarding.

Cox reviewed a number of recent initiatives at the SEC, including the proposed rules to permit the use of the Internet as an alternative means of distributing proxy materials to shareholders and the SEC's commitment to bringing interactive data to financial reports. Interactive data will make the investment world more democratic, according to Cox, and will complement efforts to improve corporate governance.