NYSE CHAIR RICHARD GRASSO, NASD CHAIR FRANK ZARB, AND BLUE RIBBON PANEL CO-CHAIRS IRA MILLSTEIN AND JOHN WHITEHEAD ANNOUNCE “TEN POINT PLAN” TO IMPROVE OVERSIGHT OF FINANCIAL REPORTING PROCESS

The New York Stock Exchange
(NYSE), the National Association of Securities Dealers (NASD) and
the Blue Ribbon Committee on Improving the Effectiveness of
Corporate Audit Committees today released its report announcing
ten far-reaching recommendations to improve the quality of
corporate financial reporting.

The “blue ribbon” panel, drawing members from the business,
financial and accounting communities, was established in
September 1998 by the NYSE and the NASD to make recommendations
on strengthening the role of audit committees in overseeing the
corporate financial reporting process.  It was created in
response to concerns expressed by SEC Chairman Arthur Levitt
about the adequacy of the oversight of the audit process by
independent corporate directors.  The panel is co-chaired by John
C. Whitehead, former Deputy Secretary of State and retired Co-
Chairman and Senior Partner of Goldman, Sachs & Co. and Ira M.
Millstein, Senior Partner of Weil Gotshal & Manges LLP and a
noted corporate governance expert.

John C. Whitehead, Co-Chair of The Blue Ribbon Committee, said,
“Our report is geared toward effecting pragmatic progressive
changes in the functions and expectations of corporate boards,
audit committees, and auditors regarding financial reporting and
the oversight process.  Quality financial accounting and
reporting can only result from effective interrelationships among
relevant corporate participants.  We view our recommendations as
an integrated set of objectives; a mosaic to enhance the
financial reporting and oversight process.”

Ira M. Millstein, Committee Co-Chair said, “The job of an audit
committee is clearly one of oversight and monitoring.  Our Blue
Ribbon panel’s recommendations are built on two essentials:
first, an audit committee with actual practices and overall
performance that reflect the professionalism embodied by the full
board of which it is a part, and second, a legal, regulatory, and
self-regulatory framework that emphasizes disclosure and
transparency and accountability.  The recommendations address
three major areas: first, audit committee membership
requirements; next, audit committee structure and function
including internal corporate mechanisms to promote accountability
among the audit committee, the outside auditors, and management;
and last, the substance and timing of audit committee
communications with management, and the outside auditor.”

“Corporate disclosure and transparency are key to good governance
and hence, to investors,” said NYSE Chairman Richard A. Grasso.
“Recommendations that promote transparency will benefit investors
and public corporations alike by ensuring that corporate
reporting is kept to the highest standards.”

Frank G. Zarb, Chairman and Chief Executive Officer of the NASD,
said, “Corporate governance is a key issue facing the management
of publicly traded companies, and the role of audit committees is
critical to that process.  These recommendations are a thoughtful
product of the expertise in this area, and are especially helpful
because they take into account the needs of the nation’s smaller
but growing publicly traded companies.  We look forward to
bringing these recommendations before appropriate boards and
committees.”

SEC Chairman Arthur Levitt said, “This action plan represents
meaningful, thoughtful and far-ranging recommendations to
strengthen the financial reporting process.  I believe that the
implementation of these recommendations, among other things, will
augment the effective oversight by audit committees and expand
their independence and expertise.  Quality, transparent financial
reporting is indispensable to strong financial markets.  Given
the broad spectrum of participation in this endeavor, I strongly
urge all participants at whom this report is directed to act
expeditiously on these recommendations.”

The committee was charged with undertaking an intensive study of
the effectiveness of audit committees in discharging their
oversight responsibilities and, within 90 days, making concrete
recommendations for improvement.  In compiling the 71-page
report, the committee sought input from a wide range of
constituencies through a public hearing and open request for
formal written comments on the topic.  Representatives of more
than 25 different financial and accounting organization
responded.

     TEN POINT PLAN TO IMPROVE AUDIT COMMITTEE OVERSIGHT

The following recommendations are excerpted from the Report and
Recommendations of the Blue Ribbon Committee on Improving the
Effectiveness of Corporate Audit Committees.  Copies of the
entire report can be obtained from the public affairs offices of
the NYSE or the NASD, or on-line at www.nyse.com or www.nasd.com.

1.   Revise Definition of Independent Director

The Committee recommends that both the New York Stock Exchange
(NYSE) and the National Association of Securities Dealers (NASD)
adopt the following definition of independence for purposes of
service on the audit committee for listed companies with a market
capitalization above $200 million (or a more appropriate measure
for identifying smaller-sized companies as determined jointly by
the NYSE and the NASD):

Members of the audit committee shall be considered independent if
they have no relationship to the corporation that may interfere
with the exercise of their independence from management and the
corporation.  Examples of such relationships include:

     -    a director being employed by the corporation or any of
its affiliates for the current year or any of the past five years;
     -    a director accepting any compensation from the
corporation or any of its affiliates other than
compensation for board service or benefits under a tax-qualified
retirement plan;
     -    a director being a member of the immediate family of an
individual who is, or has  been in any of the past
five years, employed by the corporation or any of its
affiliates as an executive officer;
     -    a director being a partner in, or a controlling
shareholder or an executive officer of, any for-profit
business organization to which the corporation made, or from
which  the corporation received, payments that are
or have been significant to the      corporation or
business organization in any of the past five years;
     -    a director being employed as an executive of another
company where any of the   corporation’s executives
serves on that company’s compensation committee.

A director who has one or more of these relationships may be
appointed to the audit committee, if the board, under exceptional
and limited circumstances, determines that membership on the
committee by the individual is required by the best interests of
the corporation and its shareholders, and the board discloses in
the next annual proxy statement subsequent to the determination,
the nature of the relationship and the reasons for that
determination.

2.   Require Independent Audit Committee

The Committee recommends that in addition to adopting and
complying with the definition of independence set forth above for
purposes of service on the audit committee, the NYSE and the NASD
require that listed companies with a market capitalization above
$200 million (or a more appropriate measure for identifying
smaller-sized companies as determined jointly by the NYSE and the
NASD) have an audit committee comprised of solely independent
directors.

3.   Mandate Minimum Audit Committee Size and Increased Financial
Literacy

The Committee recommends that the NYSE and the NASD require
listed companies with a market capitalization above $200 million
(or a more appropriate measure for identifying smaller-sized
companies as determined jointly by the NYSE and the NASD) to have
an audit committee comprised of a minimum of three directors,
each of whom is financially literate (as described in Section
III.A.2. of this Report) or becomes financially literate within a
reasonable period of time after his or her appointment to the
audit committee, and further that at least one member of the
audit committee have accounting or related financial management
expertise.

4.   Mandate Written Charter Detailing Responsibilities and
Duties

The Committee recommends that the NYSE and the NASD require the
audit committee of each listed company to (i) adopt a formal
written charter that is approved by the full board of directors
and that specifies the scope of the committee’s responsibilities,
and how it carries out those responsibilities, including
structure, processes, and membership requirements, and (ii)
review and reassess the adequacy of the audit committee charter
on an annual basis.

5.   Mandate Annual Public Disclosure of Audit Committee
Activities

The Committee recommends that the Securities and Exchange
Commission (SEC) promulgate rules that require the audit
committee for each reporting company to disclose in the company’s
proxy statement for its annual meeting of shareholders whether
the audit committee has adopted a formal written charter, and, if
so, whether the audit committee satisfied its responsibilities
during the prior year in compliance with its charter, which
charter shall be disclosed at least triennially in the annual
report to shareholders or proxy statement and in the next annual
report to shareholders or proxy statement after any significant
amendment to that charter.

6.   Clarify Oversight Responsibility for Outside Auditor’s
Engagement

The Committee recommends that the listing rules for both the NYSE
and the NASD require that the audit committee charter for every
listed company specify that the outside auditor is ultimately
accountable to the board of directors and the audit committee as
representatives of shareholders, and that these shareholder
representatives have the ultimate authority and responsibility to
select, evaluate, and, where appropriate, replace the outside
auditor (or to nominate the outside auditor to be proposed for
shareholder approval in any proxy statement).

7.   Mandate Discussion with Outside Auditor Regarding
Independence

The Committee recommends that the listing rules for both the NYSE
and the NASD require that the audit committee charter for every
listed company specify that the audit committee is responsible
for ensuring its receipt from the outside auditors of a formal
written statement delineating all relationships between the
auditor and the company, consistent with Independence Standards
Board Standard 98-1, and that the audit committee is also
responsible for actively engaging in a dialogue with the auditor
with respect to any disclosed relationships or services that may
impact the objectivity and independence of the auditor and to
take, or recommend that the full board take, appropriate action
to ensure the independence of the outside auditor.

8.   Require Outside Auditor to Discuss Quality of Financial
Reporting

The Committee recommends that Generally Accepted Auditing
Standards (GAAS) require that a company’s outside auditor discuss
with the audit committee the auditor’s judgments about the
quality, not just the acceptability, of the company’s accounting
principles as applied in its financial reporting; the discussion
should include such issues as the clarity of the company’s
financial disclosures and degree of aggressiveness or
conservatism of the company’s accounting principles and
underlying estimates and other significant decisions made by
management in preparing the financial disclosure and reviewed by
the outside auditors.  This requirement should be written in a
way to encourage open, frank discussion and to avoid boilerplate.

9.   Require Audit Committee Annual Letter to Shareholders

The Committee recommends that the SEC require all reporting
companies to include a letter from the audit committee in the
company’s annual report to shareholders and Form 10-K Annual
Report disclosing whether or not, with respect to the prior
fiscal year: (i) management has reviewed the audited financial
statements with the audit committee, including a discussion of
the quality of the accounting principles as applied and
significant judgments affecting the company’s financial
statements; (ii) the outside auditors have discussed with the
audit committee the outside auditors’ judgments of the quality of
those principles as applied and judgments referenced in (i) above
under the circumstances; (iii) the members of the audit committee
have discussed among themselves, without management or the
outside auditors present, the information disclosed to the audit
committee described in (i) and (ii) above; and (iv) the audit
committee, in reliance on the review and discussions conducted
with management and the outside auditors pursuant to (i) and (ii)
above, believes that the company’s financial statements are
fairly presented in conformity with Generally Accepted Accounting
Principles (GAAP) in all material respects.

10.  Mandate Interim Review of Quarterly Financial Reporting

The Committee recommends that the SEC require that a reporting
company’s outside auditor conduct an SAS 71 Interim Financial
Review prior to the company’s filing of its Form 10-Q.

The Committee further recommends that SAS 71 be amended to
require that a reporting company’s outside auditor discuss with
the audit committee, or at least its chairman, and a
representative of financial management, in person, or by
telephone conference call, the matters described in AU Section
380, Communications With the Audit Committee, prior to the filing
of the Form 10-Q (and preferably prior to any public announcement
of financial results), including significant adjustments,
management judgments and accounting estimates, significant new
accounting policies, and disagreements with management.

BLUE RIBBON COMMITTEE MEMBERS

In addition to Mr. Whitehead and Mr. Millstein, the Blue Ribbon
committee comprised the following individuals:

     -    John H. Biggs, Chairman, President & CEO, TIAA-CREF;
     -    Frank J. Borelli, Senior Vice President, CFO &
          Director, Marsh & McLennan Cos.;
     -    Charles A. Bowsher, Former Comptroller General of the
          U.S.;
     -    Dennis D. Dammerman, Vice Chairman and Executive
          Officer, General Electric  Co.;
     -    Richard A. Grasso, Chairman & CEO, New York Stock
          Exchange;
     -    Philip Laskawy, Chairman & CEO, Ernst & Young LLP;
     -    James J. Schiro, CEO, PricewaterhouseCoopers;
     -    William C. Steere, Jr., Chairman & CEO, Pfizer; and
     -    Frank G. Zarb, Chairman & CEO, National Association of
          Securities Dealers.