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american lawyer media news service A new type of corporate executive is on the rise, spurred by a mix of new laws, litigation fears and marketing strategies. This new executive is the chief governance officer, or CGO, often a legally trained executive who oversees a company’s corporate governance issues and acts as a liaison with the board and with investors. Although CGOs currently number only about 60, their ranks are expected to grow exponentially over the next year or so, according to David W. Smith, president of the New York-based American Society of Corporate Secretaries. In recent months, CGOs have been appointed at companies as different as conglomerate Tyco International Ltd., media giant Walt Disney Co. and doughnut maker Krispy Kreme Doughnuts Inc. That is quite a shift considering that a year ago, the number of chief governance officers could be counted on one hand. But boards of directors snapped to attention when Enron Corp.’s collapse began the current wave of corporate scandals, Congress passed the Sarbanes-Oxley Act and the Securities and Exchange Commission (SEC) beefed up enforcement efforts. Corporations that opt for a chief governance officer generally fall into two categories: There are companies that hire a CGO to offset the bad publicity generated by a scandal, such as Tyco and software firm Computer Associates Inc., both of which are under federal scrutiny for questionable governance practices; and companies like Disney, whose board has been faulted for cronyism and lack of independence. Computer Associates, whose accounting practices are being investigated by the SEC and the Department of Justice, fought back with an aggressive good-governance campaign, including the appointment of Robert Lamm as the new CGO. “Through our CEO [Sanjay Kumar], Computer Associates has made a commitment to become the ‘gold standard’ in corporate governance,” said Lamm, who joined the company two months ago after 19 years as corporate secretary of W.R. Grace & Co., followed by a stint in private practice and as general counsel of a small company. Tyco hired its new CGO, Robert J. Ott, who is not a lawyer, as part of a complete governance overhaul after it was rocked by accusations that its top executives conspired to loot the company of hundreds of millions of dollars. Disney, too, recently named Marsha Reed vice president of governance administration in the wake of heavy criticism of a board largely perceived as a rubber stamp for CEO Michael Eisner’s decisions. Disney has twice topped BusinessWeek‘s list of companies with the worst boards of directors. Reed, a former paralegal, was already a Disney vice president and corporate secretary, but is not a lawyer. On the other end of the governance spectrum, some companies have hired CGOs as a way of staying ahead of the curve. Mortgage company Fannie Mae and oil company Sunoco Inc., which have both received praise for good governance in the past, recently added CGOs to their executive rosters. Pharmaceutical company Pfizer Inc. is widely credited with hiring the first chief governance officer in 1992. The current focus on corporate governance has put Pfizer in the spotlight, said Margaret Foran, Pfizer’s CGO. Foran was formerly associate general counsel with ITT Corp. She said a large part of her job is “missionary work,” or talking to other companies about good governance practices. Foran said she has always done a lot of speaking on the subject, but these days, “It’s not quite the hard sell it used to be.” The combined pressure from Congress, government enforcement, investor oversight and the courts is likely to boost considerably the number of chief governance officers in the near future.

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