Directors Roster.

• Author: Porter, Martin
• Position: Brief Article

In affiliation with Spencer Stuart - a quarterly record of new director appointments

THE PRACTICE at many companies is to assign newly appointed directors right onto the audit committee. It can be anticipated that a high percentage of the 236 directors joining boards in this edition's Director Roster will immediately confront the complexities of audit committee membership.

And what a time to be taking on these duties. Just this year, new SEC-promulgated committee rules have been put into effect. The new rules focus primarily on the audit committee's makeup (a minimum of three independent directors); financial literacy (each audit committee member must be "financially literate"; in addition, one member must have a professional background in accounting and/or finance); required charter provisions (detailing the committee's responsibilities, how they are carried out); and, more fuller disclosure statements about the audit process.

DIRECTORS & BOARDS spoke to two directors featured in this edition's roster, asking them what they thought of these new audit committee rules.

Joining the board of Mattel Inc. is Ralph V. Whitworth, managing director of Relational Investors LLC. He is widely known for his work as a corporate governance activist, and, in certain cases, being enlisted to help turn around ailing companies, which he had been doing most recently as nonexecutive chairman of Waste Management Inc. His investment firm has taken an ownership stake m Mattel.

Whitworth says that, at a minimum, the new rules will bring not only more attention to the responsibilities of a board's audit committee but also shed more light on the duty and responsibilities of outside auditors.

"Too often outside auditors use highly technical formulas rather than just stepping back and using some common sense," he says. An admirer of Warren Buffett, Whitworth says he frequently asks outside auditors the same questions Buffett asks, including, "If you were an investor in this company, is this how you would like to see the books presented?" Common sense questions like these, says Whitworth, "supplement the technical grilling" aspects of...