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Sunday, October 03, 2004 - Page updated at 12:00 A.M.
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Workloads grow for directors as hands-on responsibilities added

By Shirleen Holt
Seattle Times business reporter

GREG GILBERT / THE SEATTLE TIMES
It's not usual for retired executive Doug Beighle to have back-to-back meetings all day to fulfill obligations of his board membership at three companies and a nonprofit organization.
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Doug Beighle pulls out his calendar from last winter and points to January. The dates are mostly filled in, some with back-to-back meetings that begin at 7:30 a.m. and end around dinner time.

There are meetings for corporate-audit committees and for compensation and governance committees.

There are lunches with chief executives that take place before the executive-committee meetings, which are scheduled before the full committee meetings — all in preparation for the board meetings.

"And I'm retired," says Beighle, noting the irony.

The 72-year-old board member's schedule is hardly extreme. Ethics crackdowns and the 2-year-old Sarbanes-Oxley Act have added layers of complexity to the typical director's job.

They face increased workloads, more responsibility and heightened expectations from shareholders, who now demand directors to be skeptical, independent and hands-on.

Indeed, outside directors at public companies now spend anywhere from 156 hours to 190 hours a year — roughly 20 to 24 eight-hour days — attending or preparing for board and committee meetings, according to surveys by the National Association of Corporate Directors and Korn/Ferry International, a consulting firm.

"It used to be 15 days or even less," says Robert Felton, who heads McKinsey & Co.'s Seattle office.

Beighle's time commitment is three or four times that of a director serving on just one board.

A familiar figure in Seattle's civic life (he's active with the Greater Seattle Chamber of Commerce and the Pacific Science Center), he sits on the boards of Washington Mutual, Puget Energy, the privately held Simpson Investment and the nonprofit KCTS-TV, Seattle's public-television channel.

Doug Beighle


He's working as much as he did before he retired, but the former Boeing executive also earns a nice sum as a director for two of Washington's leading public companies.

Age: 72

Board member: Washington Mutual (presiding director), Puget Energy (chair). Also a director of Simpson Investment (private) and volunteer chairman of KCTS-TV (nonprofit).

Committees: He serves on audit, compensation, governance and corporate-development committees on one or more boards.

Compensation: Washington Mutual, up to $116,000 a year plus stock; Puget Energy, up to $104,750 a year plus stock; compensation as director of privately held Simpson Investment is undisclosed.

Source: SEC filings

Some months he works nearly full time on board business, a schedule hectic enough to require a part-time assistant and an office downtown.

Washington Mutual's audit committee alone met 10 times last year. As chair of that committee until April, Beighle had even more involvement.

There were meetings with outside auditors, internal auditing staff, bank executives, fellow committee members and bank regulators.

New rules under Sarbanes-Oxley require directors, not corporate executives, to hire, fire and oversee outside auditing firms. It's also up to them to create a system for employees to blow the whistle on fraud, another new item in the job description.

Then there's the reading — reams of financial documents stacked eight inches high on a table in his second office, this one in the bottom floor of his Magnolia home.

"In typed form, a 10K [annual filing] probably weighs eight pounds," he jokes. "If I got drowsy and dropped the thing I'd kill the cat."

There's little doubt that corporate governance was badly in need of reform.

Many boards were often hand-picked by the very executives they were supposed to oversee. They'd become passive and clubby, either uncomfortable confronting management or too out of touch to recognize a problem brewing.

Indeed, Beighle learned the dangers of laissez-faire governance firsthand last year, when the president of KCTS-TV, Burnill Clark, resigned amid accusations of financial mismanagement, which included a $2.8 million debt to PBS.

As chairman of the nonprofit's board of trustees, one of Beighle's responsibilities was to keep the organization in the black — and to keep an eye on Clark, who he knew wasn't a strong financial manager. Instead, he and the board allowed management to operate without a chief financial officer, leaving the station vulnerable when the economic recession hit and corporate sponsorship dropped.

Once the crisis hit, Beighle did take decisive action. He and other board members lent the station $400,000 to make payroll one month. He ordered the board to start meeting every week to fix the station's problems, and quickly appointed an interim director.

"With the benefit of hindsight," Beighle says, "we should have changed course two years earlier. I think we were vigilant [but] we didn't have the best information in the world. It's one of the shortcomings of most nonprofits. The financial information isn't as developed as it would be in a for-profit corporation."

Despite the scandals of the recent years, academics and boardroom consultants wonder if the reforms will cure what ailed public companies' boards, or merely add more work.

Richard Schmalensee, dean of MIT's Sloan School of Management, predicts a backlash against some of the more burdensome record-keeping rules. "What in God's name is this doing for everybody?" he says. "There will be sentiment to reopen part of that bill and do a sanity check."

Beighle has mixed feelings, particularly about the extra paperwork added to reporting to the Securities and Exchange Commission.

"This is government's way of solving problems. Some [rules] have helped and some have just driven more process."

But the hands-on involvement now required — the executive sessions, meetings and pre-meeting meetings — has proved to be valuable, he said. Without the formality of a full board session, these intimate meetings allow directors to gain a deeper understanding of the company they're overseeing.

"It's a psychological thing," Beighle says. "If you're in a large meeting people are reluctant to ask questions because they don't want to look dumb. [Small meetings] created an atmosphere that enable people to speak out."

Shirleen Holt: 206-464-8316 or sholt@seattletimes.com

Copyright © 2004 The Seattle Times Company

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