Backtracking on the Road to Corporate Reform

As late as this spring, the reform movement seemed to still be making inroads. Michael Eisner resigned his title as chairman of Disney (DIS Quote) in March after investors withheld 45% of shares in his bid for re-election. In May, Donaldson was still stumping in favor of the proposed proxy-access rule. And many observers felt that a new rule requiring stock-options expensing was all but inevitable.

But the reform movement clearly has run into strong headwinds.

Part of the problem has a lot to do with the reformers' own success. Groups such as the Business Roundtable, which is composed of CEOs of large companies, argue that new reforms should be put on hold to give policymakers and businesses time to catch up.

"We feel there's been dramatic and lasting reforms to our system of corporate governance," said Tita Friedman, a spokeswoman for the Roundtable. "We feel we need to take a step back and let the reforms be absorbed."

In the meantime, the reform fire may be running out of fuel. After three years of declining returns, the markets rebounded strongly in 2003 while the scandal front seemingly has quieted.

"It's now been a couple of years since people lost a lot of money [in the markets]," said Turner. "Americans' memory tends to be as long as a toothpick."

There's also a general feeling in Washington that most of the major reforms have been done, said Chuck Gabriel, senior political analyst at Prudential Securities. Policymakers and regulators already have targeted auditors, board members and the mutual fund industry, he noted.

The election season is also helping stymie reform efforts. What little focus policymakers are giving to issues beyond the election these days is going to current hot-button issues such as the war in Iraq or the economy.