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The
Corporate Reform Weekly
Vol.
V, #18, May
1, 2006
In
This Issue..
Lobbying
Reform
1. US House votes to
consider weak lobbying reform bill, but barely
Oil
Prices
2.
High oil prices call Congressional attention to industry greed
Enron
Trial
3. Lay blames media for
Enron’s downfall as he testifies in Enron trial
Corporate
Governance
4.
Shareholder resolutions up again in 2006
5.
Business Ethics magazine lists “100 Best Corporate Citizens” for 2006
This
Week’s Action Item
Last
Chance on Lobbying Reform
Lobbying
Reform
1.
US House votes to consider weak lobbying reform bill, but barely
The House
of Representatives voted on Thursday to consider a Republican-sponsored
lobbying and ethics reform bill that is almost a parody of reform by a 216-207
vote, almost entirely along partisan lines. But GOP leaders had to do some last
minute arm twisting in order to get members of the House Appropriations
Committee on board, because one of the provisions of the bills required more
public disclosure of earmarks in spending bills. Earmarks are one way
that lawmakers are able to do favors for lobbyists.
What the bill
does do is it requires more and more frequent lobbying disclosure --
Quarterly instead of semi-annual reports, and new requirements about disclosing
campaign contributions and personal gifts. The bill, however, does not ban
gifts or corporate travel and does nothing to slow the “revolving door” between
Capitol Hill and K Street.
Moreover,
the House Rules committee on Wednesday threw out the following amendments that
would have strengthened the bill:
-
An amendment to create
an outside ethics enforcement commission;
-
An amendment to
require lobbyist disclosure of the multiple ways they provide to Members
campaign funds and financial benefits;
-
An amendment to
require disclosure of the huge sums being secretly spent by professional
lobbying firms to stimulate lobbying of Congress by the public;
-
An amendment to
provide permanent, not temporary, restrictions on privately-financed trips for
Members; and
-
An amendment to
require that Members pay charter costs for planes made available by
corporations and others to Members for their travel.
“The
Republican House leadership was maneuvering to prevent Members of Congress from
having to go on the record about much-needed reforms the public supports,” said
Common Cause President Chellie Pingree. “Instead, the Republican leadership
wanted Members to consider a limited number of amendments to the reform bill,
the majority of which would do little to curb the pay-to-play, ‘anything goes’
culture flourishing in Washington.”
Democratic
leaders were also very critical. "This Republican leadership's so-called
Lobbying Accountability and Transparency Act holds no one accountable and
provides little transparency to the activities of lobbyists or anyone
else," said House Minority Leader Nancy Pelosi (D-Calif.) "It is an
embarrassingly trivial response to the culture of corruption that has thrived
under this Republican Congress.
Additionally,
Rep Christopher Shays, R-Conn., who was one of the co-sponsors of an amendment
to create an independent Office of Public Integrity to police ethics
violations, chastised his Republican colleagues for their failure to produce
meaningful reform.
"We
are losing our moral authority to lead this place," said Shays, who voted
against the rule. "It's been over a decade since my party took over the
majority, and I feel like we have forgotten why we got here. ... I think there
is a tendency for power to corrupt and for absolute power to corrupt
absolutely."
The
House is expected to return to lobbying reform on Tuesday. We encourage you to
contact your Representative before the vote. (See this Week’s Action Item.)
Last month,
the Senate approved its own version of lobbying reform on a 90-8 vote. That
bill is slightly better, in that it requires disclosure of grassroots lobbying,
and it slows the revolving door by requiring a two-year waiting period before a
former lawmaker can lobby his or her colleagues. However, the Senate bill also
fails to create an independent ethics oversight committee.
Neither bill
deals with the fundamental cause of rampant lobbying -- the runaway private
money that finances campaigns and gives lobbyists much of their power.
“GOP
maneuvering to protect Members from ethics reform votes,” http://www.commoncause.org/site/pp.asp?c=dkLNK1MQIwG&b=186966
“House
Lobbying Bill, in Peril, Gains Last-Minute Rescue,”
By SHERYL GAY
STOLBERG New York Times: http://www.nytimes.com/2006/04/28/washington/28cong.html
“GOP House
leaders twist arms to pass lobby-reform bill, Some lawmakers oppose disclosure
of their 'earmarks'” Zachary Coile, Chronicle Washington Bureau
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/04/28/MNGP5IGRQ41.DTL
“Lobbying bill
quite different from 1st draft: Competing interests in House change speaker's
early prescription for scandal,” By Jim Drinkard
USA TODAY, http://www.usatoday.com/printedition/news/20060428/a_lobbying28.art.htm
Oil
Prices
2.
High oil prices call Congressional attention to industry greed
With gas
prices hovering around $3 a gallon, Congress turned its focus to the oil
industry last week.
Congressional
responses were of two kinds. First, there was widespread criticism of oil
industry greed, and renewed calls for a windfall profits tax. Second, there was
talk of easing the pain for consumers with direct measures, such as tax refunds
and gasoline tax cuts.
Criticism of
the oil industry came in a number of varieties:
Record
profits and salaries
Last week,
ExxonMobil announced it had earned $8 billion in profits for the first quarter
of the year, making 9.5 cents on every $1 of gasoline and oil sold. Though
other industries, including pharmaceuticals and financial services, have a
greater margin, the record profits were enough to set off widespread criticism.
According to
Public Citizen, since George Bush became President in 2001, the top five oil
companies in the United States have recorded profits of $254 billion:
ExxonMobil:
$89 billion
Shell: $60.7
billion
BP: $53
billion
ChevronTexaco:
$31 billion
ConocoPhillips:
$20 billion
Add that to
the fact that outgoing ExxonMobil CEO Lee Raymond recently was given a nearly
$400 million retirement package. "There ought to be a windfall-profit tax
on him," said Sen. Barbara Boxer (D., Calif.). Chevron's CEO received $37
million in total compensation last year. Conoco Phillips' CEO got $17 million.
Windfall
profits tax
Record profits
renewed call for a windfall profits tax. The basic idea is that if the price of
oil goes over a certain price, say $50, taxes would go up on oil companies.
Sen. Byron Dorgan (D-ND) is a big supporter of this approach. But last week,
Senate Judiciary Committee chairman Arlen Specter (R-Penn.) said it might be
worth considering.
States are
also considering a windfall profits tax. In California, Assembly Speaker Fabian
Nuñez (D-Los Angeles) has endorsed a state windfall profits tax.
"We
believe oil companies are ripping us off and artificially inflating the price
of gas at the pump," Nuñez said. "The 120 legislators in Sacramento
ought to be as outraged as the 14 million motorists in California," he
said, referring to members of the Assembly and the Senate.
Too
many tax breaks for oil companies
According to
the Congressional Joint Committee on Taxation, oil and gas companies are
expected to receive about $10 billion in targeted tax breaks over the next ten
years. Last year’s energy bill had $2.7 billion in tax breaks for oil companies.
Questions
about industry tax returns
Senate
Finance Committee chairman Charles Grassley (R-Iowa) wants the IRS to
investigate the tax returns for the nation’s 15 biggest oil and gas companies.
"We're
seeing record profits and significant executive compensation in the oil and gas
industry," Grassley said. "I want to make sure the oil companies
aren't taking a speed pass by the tax man."
Grassley said
his committee is considering a provision that would change the way companies
account for oil inventories. The effect would be a $4.3 billion tax hike on oil
companies.
Questions
about gouging
House Speaker
J. Dennis J. Hastert (R-Ill.) and Senate Majority Leader Bill Frist (R-Tenn.)
formally requested President Bush, order the Federal Trade Commission and the
attorney general to investigate oil company profits and executive pay, as well
as the factors behind tight gasoline supplies, to make sure there was no price
gouging.
Also, the
Senate Judiciary Committee approved a bill that would revise antitrust law so
that manipulating oil supplies to drive up prices would be illegal
In California,
meanwhile, Gov. Arnold Gov. Arnold Schwarzenegger ordered the California Energy
Commission to investigate possible gouging by gasoline refiners, wholesalers
and retailers.
"We must
not rule out the possibility of market manipulation, price gouging or unfair
business practices employed by oil companies," Schwarzenegger told
reporters.
-
In addition,
Congressional Democrats and Republicans have promoted separate plans for
immediate relief. Republicans have proposed giving taxpayers earning below a
certain income a $100 tax refund to help ease the pain of $3 a gallon gas.
Democrats, meanwhile, have called for a 60-day moratorium on federal gasoline taxes,
which are 18.4 cents per gallon. Republicans have also used this as another
opportunity to call for drilling in the Arctic National Wildlife Refuge and to
weaken environmental regulations that they say discourage oil companies from
investing in new refining capacities.
For more, see:
“Second
Thoughts in Congress on Oil Tax Breaks,” By EDMUND L. ANDREWS and MICHAEL
JANOFSKY, http://www.nytimes.com/2006/04/27/business/27oil.html
“G.O.P.
Senators Hurry to Quell Furor Over Gas,” By CARL HULSE http://www.nytimes.com/2006/04/28/washington/28energy.html
“Oil industry
profits, salaries fuel outrage Consumers feel gouged, but are profits really
out of line?” By Lisa Myers MSNBC, http://msnbc.msn.com/id/12519975/
Public
Citizen: http://www.citizen.org/cmep/
Enron
Trial
3.
Lay blames media for Enron’s downfall as he testifies in Enron trial
Enron
founder Kenneth Lay took to the witness stand last week, defending himself
against accusations that he and former Enron CEO Jeffrey Skilling knew full
well that Enron was a financial house of cards built on fraud, and yet
continued to publicly say that Enron was fine and poised to do even
better.
Lay told
jurors that Enron’s downfall was not the result of fraud, but of overzealous
newspaper reporters, who relentlessly published damaging stories about Enron’s
finances, setting of a market panic that ultimately caused the company to
collapse. Lay accused the Wall
Street Journal of
conducting a “witch hunt” against Enron.
Lay said that
he relied on Enron’s accountants and lawyers, all of whom signed off on the
off-the-books partnerships set up by former CFO Andrew Fastow. These
partnerships were one of the many ways that Enron was able to misrepresent its
finances to investors.
"We
thought we had put in adequate safeguards," Lay testified.
Lay said that
he was deceived by Fastow and Arthur Andersen. He tried to portray himself as a
big-picture strategic thinker who didn’t get bogged down in small details like
accounting rules or particular transactions. "We didn't realize at that
time that those transactions would become so important to the history of the
company and the history of this corporate era," he testified, referring to
the off-the-books partnerships. He said that when he learned that Fastow had
privately earned $45 million from the deals, "I was shocked.” He suspended
Fastow that same day.
Under attack
from prosecutors later in the week, Lay defended his decision to sell 500,000
shares of Enron stock between July and August 2001, even as he was publicly
calling Enron stock an “incredible bargain.” Lay testified that: "I
strongly and firmly believed it was an incredible bargain.” The reason for the
sale, he said, was that he needed to pay off $100 million in personal debts,
most of which was backed by Enron stock. But prosecutors noted that Lay was
able to sell his stock back to Enron on a special line of credit only for top
executives and didn’t report those sales immediately, at the advice of company
lawyers.
Lay earned
$223 million in total compensation between 1999 and 2001. But he told jurors
that he had to sell off three homes in Aspen, Colo., and three homes in
Galveston, Texas, to pay off legal fees and debts.
Reports from
the trial described Lay as exhibiting fatigue and occasionally losing his
temper under cross-examination from prosecutors.
For more, see:
“Lay Loses His Cool on Stand,”
By ALEXEI
BARRIONUEVO and SIMON ROMERO: http://www.nytimes.com/2006/04/27/business/businessspecial3/27enron.html
“Enron
Prosecutor Attacks Theory of 2001 Collapse,” By ALEXEI BARRIONUEVO and SIMON ROMERO:
http://www.nytimes.com/2006/04/28/business/businessspecial3/28enron.html
“Lay Blames
Financial Officer and Newspaper Articles for Enron's Fall,” By ALEXEI
BARRIONUEVO: http://www.nytimes.com/2006/04/26/business/businessspecial3/26enron.html
Corporate
Governance
4.
Shareholder resolutions up again in 2006
This year will
be the most active ever in terms of shareholder resolutions, according to the
Social Investment forum. At least 400 corporate governance resolutions are
being voted on this year, up from 383 last year.
“The
2006 proxy season is shaping up to be even busier than 2005, with shareholders
and companies negotiating and, where necessary, squaring off on major issues
ranging from climate change to declassifying their boards,” said Social
Investment Forum President Tim Smith. “We already have seen important
negotiated agreements this year with 84 environmental and social resolutions
withdrawn and 63 corporate governance resolutions withdrawn, often after
significant concessions were made by companies. This reflects real
progress, but much work remains to be done.”
Resolutions
dealing specifically with executive pay are down to 150, from 252 last year,
but the number of resolutions requiring majority votes for board of directors
is up to 126, from 79 last year, reflecting a changing approach that puts more
attention on directors.
“This
year’s resolutions on corporate governance reveal a shift in strategy on the
part of shareholders, and a focus on director accountability,” said Carol
Bowie, vice president/director of Corporate Governance Services at
Institutional Shareholder Services. “ISS data suggest that companies and
shareholders may be participating in more dialogue both before and after filing
deadlines. Even though the overall volume of governance resolutions is
down, proponents seem to be concentrating their energies on building support at
key companies.”
Social and
environmental shareholder resolutions are up to 180, from 169 for the same
period in 2005. That includes 32 resolutions on global warming, 22 resolutions
on toxics and pollution, and 43 resolutions on political campaign contributions
and donations.
Commenting on
the environmental resolutions, Meg Voorhes, director, Social Issues Service,
Institutional Shareholder Services, said: “Many companies and investors
are beginning to study and grapple with the enormous challenge that climate
change poses to business. Concerned investors are looking for evidence in
the filings and public statements of companies most vulnerable to climate change
risk that they are approaching the problem with due diligence and considering
ways to innovate their products and processes. Where they do not see this
evidence, they are asking companies to conduct strategic reviews at the highest
levels of the company. ”
The
resolutions on political contributions and donations call on companies to issue
reports that detail their political donation policies. So far, Coca-Cola,
McDonalds and Staples have agreed to do so. According to a study conducted by
the Center for Political Accountability, 85 percent of American shareholders
are worried that company political spending “puts corporations at legal risk
and endangers” shareholder value.
For more, see:
“SOCIAL INVESTMENT FORUM: 2006 ENVIRONMENTAL, SOCIAL SHAREHOLDER PROXY
RESOLUTIONS UP FROM 2005, WITH EMPHASIS ON GLOBAL WARMING, TOXICS AND POLITICAL
DONATIONS” Social Investment Forum Press Release
http://www.socialinvest.org/2006ShareholderProxySeasonPreview.htm
5.
Business Ethics magazine lists “100 Best Corporate Citizens” for 2006
Business
Ethics magazine has
released its “100 Best Corporate Citizens” list for 2006. Coming it at number
one was Green Mountain Coffee Roasters (of Waterbury, Vermont, which was cited
for its "meticulous attention to corporate social responsibility,"
including its pioneering work in the fair trade movement, which pays coffee
growers stable, fair prices. This is Green Mountain’s fourth consecutive year
in the top ten.
The rest
of the top-ten is as follows:
2
Hewlett-Packard Company
3
Advanced Micro Devices, Inc.
4
Motorola, Inc.
5 Agilent
Technologies, Inc.
6
Timberland Company
7
Salesforce.com, Inc.
8 Cisco
Systems, Inc
9 Dell
Inc.
10 Texas
Instruments Incorporated
Marjorie
Kelly, Editor of Business
Ethics said that the
reason that so many tech companies were in the top ten was because they tend to
score well on environmental issues, community involvement, and employee
relations. "These firms know that to attract and retain talent, it pays to
be socially enlightened,” Kelly said in a press release. “High-tech seems to be
a genuinely socially responsible sector."
The list
is based on rankings created by KLD Research & Analytics, Inc. in Boston,
an independent research firm serving investment management professionals.
The 100
Best Corporate Citizens, now in its seventh year, is intended to challenge the
notion that firms should only be judged on financial returns.”
“Traditionally,
firms have been judged on how well they serve stockholders,” said Kelly. “But
in the 21st century -- a new era of ecological limits, corporate ethics crises,
and rising societal expectations -- this traditional focus offers too narrow a
definition of success. Firms rely upon healthy relations with many
stock-holders. That means not only creating healthy returns for shareholders
but emphasizing good jobs for employees, a clean environment, responsible
relations with the community, and reliable products for consumers.”
For more, see:
http://www.business-ethics.com/whats_new/100best.html'
This
Week’s Action Item
Last
Chance on Lobbying Reform
It looks like
Tuesday, the U.S. House will finally vote on a weak lobbying reform bill. This
is your last chance to let your Representative know where you stand on lobbying
reform.
Tell your
Representative that you know that the bill being put forward, as it stands, is
a sham.
Tell your
Representative that a real lobbying reform bill would include the following:
-
An independent
Office of Public Integrity, to monitor ethics violations
-
Full disclosure of all
lobbying activities, including grassroots lobbying and all fundraising
-
A ban on all gifts and
privately-funded travel
-
A slowing of the
revolving door between Capitol Hill and K Street
-
An end to private
money in public elections
Contact your congressional representative: http://www.house.gov/writerep/
