3 April 2003 Semiconductor giant Intel has announced plans to tighten its corporate governance procedures, starting with a strategic review of executive pay and perks. It will also introduce an open bidding process by which auditors will be appointed.
Other proposals Intel is considering include the formal separation of the roles of chairman and CEO, limits on top executives’ stock options and more stringent rules governing potential conflicts of interest for company directors.
“Business and society must re-establish the balance of power between the CEO and the board of directors. Separating the roles of chairman and CEO is an important step toward better corporate governance,” wrote Intel chairman Andy Grove in a letter to stockholders.
The review of executive compensation will examine alternatives to stock options, such as incentive schemes that reward management based on increases in the company’s stock market valuation. However, the company has come out firmly against calls from some shareholders to expense stock options.
“We are strongly opposed to the mandated use of expensing, which we believe is a deeply flawed method of accounting that will affect the accuracy and clarity of our financial reporting and that has the potential for causing real economic harm to Intel and our stockholders,” wrote chief financial officer Andy Bryant in Intel’s latest regulatory filing.
“Proposals to change the accounting treatment for stock options will impair rather than improve the usefulness of our financial reports… [It] would be counter-productive for your company and to the goal of continuous improvement in financial reporting,” he added.