Corporate Governance: Embracing Sarbanes-Oxley

The stakes have risen in the compliance game. A series of incendiary scandals-followed by the Sarbanes-Oxley Act and its implementing regulations-have focused the scorching light of public scrutiny onto public companies in all industries, and the heat is particularly intense for investor-owned utilities.

Regulators and investor groups demand that utility companies demonstrate they are squeaky-clean, inside and out. From American Electric Power Co. to Maine Public Service, energy and utility companies across the nation are renewing their commitment to ethics and good governance.

That, as Martha Stewart might say, is a good thing.

But now that the smoke is beginning to clear from the American corporate conflagration, companies are moving out of firefighting mode and into long-term fire prevention.

"Now the challenge for companies is to ensure that the compliance programs they have established adhere to best practices," says Deborah Meshulam, a partner with the Piper Rudnick law firm in Washington, D.C., and formerly assistant chief litigation counsel with the SEC's enforcement division.

"Sarbanes-Oxley has added a wide range of new issues to the traditional compliance function," Meshulam says. Coping with these issues on a long-term basis requires companies not only to review and update their policies; it requires them to make substantive organizational and cultural accommodations, and to train personnel at virtually all levels on the new compliance mandates.

So even as the scrutiny subsides, companies must maintain their commitment to the goal of unimpeachable corporate ethics. Doing that cost-effectively and efficiently across the entire organization is the next big challenge in the governance game.