Corporate Conscience, Improved

Spurred by the Enron debacle, and following in the wake of scandals among other corporate giants, members of Congress wisely passed the Sarbanes-Oxley Act in 2002 - a tough bill designed to clean up corporate governance. A new, independent review of the way corporations now are doing business gives publicly held US companies high marks, evidence Sarbanes-Oxley is having the desired effect.

A private corporate watchdog, GovernanceMetrics International, looked at 2,588 companies around the world, assessing them on measures such as board accountability, transparency, and shareholder rights. On a scale of 1 to 10, the 1,154 US companies in the group received an average of 7.23 - up from a 6.5 average in a similar study done in 2002.

That's hopeful news indeed; in fact, it's the highest average given among the countries studied. And kudos to General Motors, Gillette Co., and 3M - each were among 20 US companies that received a perfect 10 score in the review.

Much of the success, no doubt, can be attributed to more US companies giving directors training in good governance. In fact, the study found 80 percent of companies were doing so, compared to just 14 percent in 2002. Ninety percent of the companies studied also showed they now had board evaluation policies, compared to just 35 percent in 2002. And another correlation GovernanceMetrics found for all the corporate good work: better investment returns for shareholders.

In spite of these high marks, US companies still have work to do. Not enough have separated their board chairs and chief executives, for instance. And the remuneration for senior officers in 2003 was a whopping 500 times higher than employees in the same company - still far too large a discrepancy.

While it's too bad it took a law that carries with it criminal punishment to wake some corporate leaders up to their responsibility to their companies and their shareholders, this latest review proves that companies can improve, and quickly, if need be.