That’s one of the conclusions that could be drawn from the increasing attacks
on audit committee chiefs, in the wake of the credit crunch meltdowns across a
number of institutions, especially those in the US.
I’m thinking of Michael Armstrong, late of Citigroup, who was forced to step
down in the face of fierce criticism from investors. It’s reported that those at
Washington Mutual are also in the firing line.
What does it mean for joining a board as a non-executive and then taking a
place on the audit committee? It means, you better know what you’re doing, and
you better have done your own due diligence, because if it all goes belly up
then not only will investors be stalking the executives and the auditor, but the
audit committee too.
Audit committee seats have been more risky since Enron and the introduction
of internal controls regulation. To be fair, under Citigroup’s own audit
committee charter, there is little about the committee chairman being
responsible for investment policy. The job is about the integrity of financial
Ironically, it could be argued that Citigroup’s big writedowns were all about
ensuring the reporting was correct under the current set of rules. Given the
current set of rules, the reporting at Citigroup is likely to be entirely
Is that where we’re heading? Audit committee chairmen responsible for
investment strategy? That sounds like a big departure from the traditional role,
but then the current mood among company investors is to make everyone
responsible, making the non-executive job increasingly unattractive.
This could result in its own problem. If you can’t employ decent
non-executives, your corporate governance is in danger of falling over anyway.
Gavin Hinks is editor of Accountancy Age
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