Ira Millstein
Senior Partner
Weil, Gotshal & Manges
New York, N.Y.

Q: What went wrong with corporate governance?

A: The economic bubble of the late 1990s bred a sea of avarice and greed the likes of which have never been seen before. The CEOs were unchecked by the boards of directors. The lawyers forgot that their duty was to shareholders. The system simply broke down, and thousands and thousands of people were misled.

More active and vigilant boards could have caught the problems a lot earlier. … People are always going to be dumb and do stupid things and lose money. But hopefully we can make it a little less painful.

In the 1980s and the 1990s, we had tons of “best practices,” [model procedures] and they were working charmingly, we thought. Now the NYSE, Nasdaq and Congress have stepped in and taken those best practices and made them law.

I also see an explosion of litigation over breach of fiduciary duty [by boards] coming. The Delaware Supreme Court has just issued a string of decisions on this, and every one held against the board and for the shareholders.

There’s also a new standard of conduct. Sarbanes-Oxley and the NYSE listing requirements are warning you to behave a lot better, to self-correct.

Q: How do we make boards better?

A: We need to give some independent directors enough authority to develop the board’s agenda so there’s the kind of information flow that’s needed.

And we need to separate the chairman and CEO jobs. A board run by the CEO is not going to be very enthusiastic about changing … compensation. The president of the United States can’t be the chief justice of the Supreme Court, too.

Neal Wolin
Executive Vice President and Secretary
The Hartford Financial Services Group, Inc.
Hartford, Conn.

Q: What changes has your company made, or does it plan to make, in response to Sarbanes-Oxley?

A: For us, Sarbanes-Oxley is not going to be much of a change. We already had a strong, independent general counsel’s office that was in close and regular contact with our board of directors and members of senior management. Our clients have always assumed — and indeed expected — that any suspicion of fraud or wrongdoing would be investigated thoroughly, even before SOX.

The Hartford is an old-line company, and we’re very concerned about our integrity. If anything smells or looks funny, it gets aired out, and that predates SOX.

However, as a result of the new certification requirements [senior executives have to sign off on company financials], we have formalized a number of our processes relating to internal reporting. In addition, a group of about 12 senior members of our financial, audit and legal staffs now meet twice a quarter to consider refinements to our existing procedures and implementation of new ones.

In terms of the CEO and CFO certifications required by SOX, we’ve put processes in place for sub-certifications by business unit heads and senior financial and legal staff. We’re being prudent, doing the appropriate amount of due diligence to make sure the certifications are true, not just the bare minimum.

Q: Previously, you served as general counsel of the Treasury Department. Do you have any advice for other GCs, based on that experience, for handling media attention?

A: Working in the government, you get used to being under a lot of scrutiny. It’s always important to be transparent about what you’re doing. You do not want to do anything you wouldn’t want to read about tomorrow on the front page of the The Washington Post.

Randall Sones
General Counsel and Secretary
Allegis Group Inc.
Hanover, Md.

Q: Allegis Group is not a publicly traded company. But what’s your view of the Sarbanes-Oxley legislation and the stock exchanges’ listing requirements?

A: I’m most interested in seeing how the new SEC rules governing the standard of conduct for attorneys unfold. In the Allegis Group legal department, we always have had a form of “up the ladder” reporting requirement, from the assistant general counsel assigned to business units to the general counsel’s office, and from the general counsel’s office to the board of directors.

The concern I have, and believe most in-house counsel share, is whether management will be hesitant to come forward with issues that could develop into “material violations” if they perceive the lawyers to be subject to some new, heightened disclosure requirement.

If the effect of these new SEC rules is to cause management to delay or avoid involving counsel when a potential issue arises, then, while the lawyers may be absolved of responsibility, the intended benefits of such rules to the companies, their boards, and their shareholders will be lost.