By Amy Higgins
The Cincinnati Enquirer

The future of corporate governance looks largely Darwinian, according to Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission.

Companies with the strongest and most fit ethics and accounting policies will be those that thrive, Pitt said Thursday at Cincinnati's Corporate Responsibility Institute.

The institute, established in March by the Frost Brown Todd law firm, helps educate corporate directors and officers about rules and regulations passed by Congress and the SEC.

Thursday's session featuring Pitt, who led the SEC from 2001 to 2003, was the institute's second forum.

While the crisis in corporate confidence that crippled the stock market a year ago hasn't fully passed, regulators and the private sector have made significant strides in restoring lost faith, Pitt said.

"It doesn't mean that the crisis in confidence is over," Pitt said of the recent upswing in stock indexes. "But investors are becoming more confident that the right steps are being taken."

SEC regulations and the Sarbanes-Oxley Act enacted in the last year didn't make accounting fraud any more illegal than it already was, but they did erase some ambiguity about officers' liability, Pitt said.

They were "necessary to ensure the excuses, ambiguities, oversights, insensitivities and inattentiveness had even less justification," Pitt said.

But the pressure points of the future will come from private-sector entities, Pitt said, including:

• Rating agencies, which should add ethics policies and governance controls to their corporate rating criteria.

• Insurance companies, which should reassess their standards of issuing liability insurance to directors and officers.

• Accounting firms, which should more carefully screen prospective clients.

• Investment bankers, who also should select prospective clients more carefully.

• Institutional investors, who will find greater long-term returns in companies that operate with the highest integrity.

"What we will have is financial Darwinism," Pitt said. "When the best and fittest survive and prosper."

E-mail ahiggins@enquirer.com.