Hospital chain HCA Inc. agreed Tuesday to overhaul its corporate governance under a settlement with state pension funds.
"The corporate governance plan being adopted by HCA significantly raises the bar on accountability for all of corporate America," New York Comptroller Alan Hevesi said.
The settlement proposes more stringent changes than those spelled out in the Sarbanes-Oxley Act of 2002 and in tighter listing standards proposed by the New York Stock Exchange, which is awaiting their approval from the Securities and Exchange Commission.
Earlier Tuesday, HCA reported a fourth-quarter loss of $102 million, or 20 cents a share, after taking a $418-million charge to settle the Department of Justice investigation that helped spark the lawsuit.
The lawsuit, brought by former New York State Comptroller H. Carl McCall, dates to 1997 when HCA, then known as Columbia/HCA Healthcare Corp., was in the thick of a Medicare fraud investigation.
The case was a consolidation of derivative lawsuits in October 1997 filed by several state pension plans on behalf of the company against certain Columbia/HCA directors and officials for breach of fiduciary duty, gross misconduct, mismanagement and corporate waste. The settlement is subject to approval by the U.S. District Court for the Middle District of Tennessee.
Corporate governance has become a hot issue with regulators since the bankruptcy filings of Enron Corp. and WorldCom Inc.
The proposed settlement would require that two-thirds of HCA's board be independent directors. The NYSE requires only a simple majority of independent directors and does not make the board responsible for monitoring compliance, the comptroller's office said.
HCA's audit committee would be required to have at least two members with accounting or financial experience, compared with one under Sarbanes-Oxley and NYSE rules, the comptroller's office said.
The settlement also would call for more stringent standards about consulting relationships or hiring people who have done audit work for HCA than NYSE or Sarbanes-Oxley provisions, the comptroller's office said.