By Amy Higgins
The Cincinnati Enquirer
Messer Construction doesn't have to answer to Wall Street, investment analysts or even the U.S. Securities and Exchange Commission.
Yet, in February, the Bond Hill company's management formed an audit committee of three of the four independent advisers who sit on the company's board.
"We felt a responsibility to the employee shareholders," said Messer president Peter S. Strange, whose company is wholly owned by an employee stock ownership program (ESOP). "It's been a really good, appropriate step for us."
Greater Cincinnati 100 survey questions involving governance issues:|
Does your company have an outside board of advisers?
No (or no response) 62
An audit committee?
No (or no response) 80
Do you expect fees for outside board members to increase?
Do not compensate board members 28
No response 33
Do you (CEO or CFO) currently serve on a board of advisers or audit committee for a private company?
No or no response 56
Would you (CEO or CFO) be willing to serve on a board or audit committee for a private company?
No (or no response) 49
Do outside members of your management team outnumber family?
No (or no response) 34
Does you company have a written code of ethics?
No (or no response) 55
Over the past five years, do you think business ethics have:
Stayed the same 44
No response 12
Do you think auditing should be regulated similarly to the IRS?
No (or no response) 83
Do you think the issuance of stock options to employees/directors should be charged to expenses?
No (or no response) 36
Should there be restrictions on public accounting firms performing audit services and tax consulting services for a company?
No (or no response) 54
But Messer is in the minority among companies in the Greater Cincinnati 100, the region's largest privately held firms.
Being privately owned - usually by a single person or family members - such companies are not held to the same standards and regulations as those that issue shares to the public.
"What's happening in the world of public companies is not relevant for us," said Peter W. Chronis, sole owner of Reece-Campbell Inc. "If I goof with the books, I'm just goofing with myself."
That's why most companies in the Greater Cincinnati 100 survey don't need to mimic their public company brethren with outside directors, audit committees or other corporate governance structures. According to the 2002 Greater Cincinnati 100 survey:
38 companies have an outside board of advisers.
20 companies have an audit committee.
45 companies have a written code of ethics.
Typically, the more concentrated company ownership is, the less likely it is to have such corporate governance structures in place.
"We take care of ourselves here," Mr. Chronis said.
CBS Personnel had such an arrangement before October 2000, when Compass Equity, a Connecticut-based venture capital firm, purchased a majority stake. Now having bank-financed outside investors, the company put independent directors on its board and formed an independent audit committee.
But the firm was motivated to add another outside adviser to its board this past summer when corporate accounting scandals at WorldCom and Enron put the spotlight on directors' independence.
"Those were eye-openers for the governance issue," said Frederick L. Kohnke, CBS Personnel's president and chief executive officer. "We felt it was in the best interest of our ownership group.
"They wanted to get another perspective."
Getting the outside point of view is also why restaurant company Bistro Group is looking for its third outsider to add to its board. Only three members of the family that owns the company are also members of management.
"It really helps us take a harder look at our business," said chief executive James Combs III, who also said the company uses a series of committees that mirror those used in public companies.
"It all together gives the shareholders confidence in the way the business is being handled," he said.
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