CFOs Want More Disclosure on Auditor Exits

Seven of 10 finance executives believe companies should be required to provide more detail when they change auditors, according to a new survey by Grant Thornton.

The accounting firm specifically asked 688 chief financial officers and senior comptrollers: Should the SEC enhance the 8-K rules to require explanations for all company dismissals of auditors, for all auditor resignations, and for all instances in which the auditor chooses not to stand for reappointment?

Seventy percent said yes, 30 percent no. (Note that Grant Thornton, generally acknowledged as the fifth-largest accounting firm, is an interested party in the survey results because it stands to benefit when clients dismiss Big Four firms or those top-tier firms resign from clients.)

The finance executives were also asked about pay levels for their bosses. Two-thirds (66 percent) said they believe the average chief executive is overpaid. One-third (33 percent) said CEO pay is appropriate. Just 1 percent believe CEOs are underpaid.

The responses, however, were much different when it comes to their own companies' CEOs. Just a quarter (25 percent) said their CEO is overpaid, and 14 percent said they are underpaid.

Governance was another topic the survey addressed. More than four of five (83 percent) respondents said they think the same person should not be both CEO and chairman roles, according to the survey. That is a belief commonly championed by shareholder activists, though the practice has not caught on in a big way.

At of the end of 2007, just 37 percent of S&P 500 companies had different people serving as chairman and CEO. That was up from 34 percent in 2006 and 30 percent in 2005, according to RiskMetrics Group.

Governance advocates also have called for companies that split the two roles to name an independent chair, but the campaign has mostly fallen on deaf ears. According to RiskMetrics, just 11 percent of the companies with split roles had an independent chair.

The Grant Thornton survey also found that 63 percent of finance executives believe shareholders should have more access to proxy statements so they can nominate directors more easily, versus 37 percent who don’t believe so.