Friday, May 23, 2003 | 11:49 a.m.
New laws regulating corporate governance of public companies should result in more qualified people serving on boards of directors, panelists at a gaming forum concluded Thursday.
Panelists addressing corporate governance issues and the Sarbanes-Oxley Act of 2002, which increases the Securities and Exchange Commission's oversight of public companies, also said new rules also should improve ethics and result in truer reporting of companies' financial results.
The Sarbanes-Oxley legislation was enacted following corporate scandals at Enron Corp. and WorldCom Inc.
The panelists' remarks came at the 25th annual Financial Executives Gaming Forum sponsored by the Nevada Society of Certified Public Accountants.
In a round-table discussion of chief executives, Tim Wilmott, chief operating officer of Harrah's Entertainment Inc., said he expects the Sarbanes-Oxley Act would improve the quality of boards of directors as people with a better understanding of corporate governance would be sought to serve as directors.
Richard Flaherty, dean of the College of Business at the University of Nevada, Las Vegas, said on another panel that he expects changes in corporate governance rules will result in universities offering courses to educate board directors on the new policies.
But Flaherty said a bigger educational challenge may be in how to teach business ethics.
"Thirty-three years ago, when I got into education, I would have said, yes, you can teach ethics," Flaherty said. "Now, I'm thinking that maybe the answer is no."
But he said it's critical for educators to try.
Flaherty said he believes individuals need to have a personal set of values and a moral code of ethics from which to build on business ethics. Once that moral compass is in place, he said, business case studies, simulations and role playing can be presented in an attempt to improve ethical conduct in the business world.
It was clear from panelists that executives are still sorting through the Sarbanes-Oxley rules to determine how to apply them.
For example, Dan Lee, chief executive officer of Las Vegas-based Pinnacle Entertainment Inc., and Glen Schaeffer, president of Mandalay Resort Group, concurred that earnings-per-share figures are easy to manipulate with non-cash charges like stock options and that cash-flow numbers are harder to manipulate.
Since Sarbanes-Oxley rules require reporting earnings per share and not cash flow, Schaeffer said his company will report just those numbers. Lee said his company looks at cash flow figures as "additional information" for investors and will continue to offer them.
Lee commented on one of the ironies of financial reporting.
"Our whole industry is based on what the numbers look like," Lee said. "We want to show how little we made to the IRS to minimize our taxes, but we want to show a big number to Wall Street. What we really need is one set of books."
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