Choosing wisely: some corporate directors may be stepping down from their posts over the next few months. Those who fill their shoes can expect more scrutiny, more accountability, and more penalties for negligence.

SIGNED INTO LAW IN 2002, THE Sarbanes-Oxley Act was in direct response to the corporate misconduct committed at such companies as Enron, WorldCom, and Tyco. With the beginnings of its implementation in progress, the business community is reacting. "What's happening now is a sea change," said

panelist and former U.S. Secretary of Commerce Barbara Hackman Franklin. "We each need to take a deep breath and let it all settle down." Some can breathe deeper than others. "It's been my experience -- and I'm happy to say this -- that a lot of what is now required has largely been in place at the five boards I've been associated with over these past 20 years," said Peter Tobin, who's currently on the board of directors of AXA. Financial Inc. and The Equitable Life Assurance Society. For instance, he pointed out, from 1992 to 1997, when he was the chief financial officer of a large New York bank, the chief executive officer (CEO) and the controller certified the financial statements of the bank, a process that continues to the present day. * Although many of the so-called reforms outlined in the Sarbanes-Oxley Act are already in place at good companies, a large slice of the corporate arena hasn't even started to figure out what their problems are. Without these reforms, the panelists warned, auditors, officers, and directors could face huge monetary fines and, far worse, jail time. * "It's clear that, at the very least, complacency has crept into the system," Tobin said. "At the very worst, there has been, as we know, outright accounting and disclosure fraud and probably a lot of gray in between for a lot of companies that were just not sure what's actually going on. I must say, as an audit committee member, I actually welcome the new legislation."

IMPENDING CHANGES

To Tobin, who serves on five different boards and is chairman of two audit committees, Sarbanes-Oxley has significantly tightened up the requirements for sound corporate governance and, perhaps most importantly, established criminal penalties for executives, accountants, and even possibly board members. "I am, in effect, what some people call a financial expert," said Tobin, who is a certified public accountant. "Now, I approach the signing and certification as if I was going to be criminally liable if I did something inappropriate."

Franklin, the president and chief executive officer of international consulting and investment firm Barbara Franklin Enterprises, thought a company needed a good board of directors to help bring credibility back to the accounting profession. After the debacle at Arthur Andersen, no one in the audience even raised an eyebrow.