While publicly traded plastics processors seem to have avoided the corporate excesses that helped bring down executives at giants like Enron Corp. and Tyco International Ltd., many of them are now making changes to comply with tougher rules enacted in the wake of those scandals.
Consider these examples:
* Tupperware said it would no longer be able to give executives loans to buy stock.
* Several companies said they're examining the makeup of their boards to ensure that they have a majority of independent directors.
* And in some cases, directors moved to sever outside financial relationships with companies or their executives. While companies generally said the relationships do not hinder judgments, corporate governance experts said they raise questions about whether boards can be appropriately independent from shareholders.
Tupperware told the Securities and Exchange Commission that the Sarbanes-Oxley Act, passed last year, requires it to stop loaning executives money to buy company stock.
The company said it loaned executives more than $20 million as a way to substantially increase the amount of company stock they hold so that their interests more closely match that of shareholders. As a result, Chairman E.V. Goings owes the company $10.6 million, and other executives and employees owe another $10.6 million.
About $7.4 million of Goings' debt is interest-free from a 1998 loan, while the remainder of his and all the others' debts stem from loans in 2000 at between 5 and 6 percent interest. All the loans mature over eight years.
The arrangements carry risks for the executives if the stock loses value and is not worth enough to pay off the loans. Goings, for example, still owed $7.4 million in 2002 from the $7.65 million he borrowed in 1998.
While companies defend the practice and executive compensation experts say it's good for executives to have equity, such loans are sometimes criticized because companies wind up forgiving them when times are bad, or because they are not always available to rank-and-file employees.
Charles Elson, director of the University of Delaware's Weinberg Center for Corporate Governance, said stock ownership is good, but executives should go to a bank and borrow money to do it.
Tupperware officials did not respond to requests for an interview.
Like many companies, U.S. Plastic Lumber Corp. made a specific point in SEC filings of saying that it was reviewing the flurry of new rules, from Sarbanes-Oxley to Securities and Exchange Commission requirements to new standards for listing on Nasdaq. It said it was looking at establishing a code of business conduct and working to make its board and committees more independent.
One change that has been made already: two members of its compensation committee were stepping back from a partnership they had with Chairman Mark Alsentzer in an outside company.
Alsentzer and board members Gary Ziegler and August Schultes had been general partners in Stout Partnership, a Woodbury, N.J., group that owns 36 percent of USPL. But as of January 30, Schultes and Ziegler said they were no longer partners in Stout, the company told the SEC.
In both cases, they gifted their stakes in Stout to other partnerships controlled by their respective families, the company said in SEC filings.
Spartech Corp. said that it, too, was contemplating changes in its board to comply with proposals from the SEC and New York Stock Exchange requiring that a majority of board members be independent. The company said it was thinking of adding new board members who meet those guidelines, and it said it might change the size of its board.
It also told the SEC that one board member, Ralph Andy, sold his 44 percent stake in a company, Plastimerics Inc., that did about $1.1 million in business with Spartech in 2002.
Spartech officials did not respond to requests for an interview. But last year, they and Andy defended the relationship and said in interviews with Plastics News that it did not compromise Andy's judgement.
The firm told the SEC that the terms between Spartech and Plastimerics were ``no less favorable'' than Spartech could have gotten from an unaffiliated company.
The company retains other board members who have outside financial interests: One director is an investment banker whose firm did $8,000 worth of work for Spartech in 2002, and another is the managing partner of the company's chief outside law firm, relationships that are not seen on some other boards.
The University of Delaware's Elson said the key is whether the financial relationship between the board member and the company is significant.
``If it is inadvertent and inconsequential, I'm not worried about it,'' Elson said. ``It's the significant ongoing fees that worry me.''
While much of the debate about corporate reforms has focused on financial independence of board members, some observers say other changes could help.
Paul Hodgson, a senior research associate in executive compensation at The Corporate Library, a corporate governance research firm in Portland, Maine, said companies could appoint board members from labor unions, or they could make it easier for shareholders to directly nominate their own directors, rather than voting on company-selected ones.
Other experts, however, say that letting shareholders more easily nominate directors could result in boards filled with those who don't understand the business as well.
If more independence is accepted as the new conventional wisdom, some companies are openly questioning whether those rules make sense in all cases.
One firm, Polyair Inter Pack Inc., said the push for independent boards does not matter as much when the companies are smaller and have one or two large shareholders, a situation sometimes seen in the Plastics News ranking.
Four of Polyair's six board members don't meet the definition of independent at the Toronto Stock Exchange, where it's traded. But because Chairman Fred Litwin owns 48 percent of the firm, the company said in filings with the Canadian government that those rules aren't that important.
``The focus in the TSE Guidelines on the independence of the board from management is neither necessary nor desirable in the Corporation's circumstances,'' the company said. Still, Polyair said it would appoint a governance committee to monitor the board.
Elson, however, said companies that do not want independent boards should go private.
``Any time you're a public company, you need independent directors,'' he said. ``It's the price you pay for taking on public capital.''