The
Corporate Reform Weekly:
Citizen Works' look at the Campaign
for Corporate Reform
March 4, 2002
Dear Citizen,
We are at a crucial moment in our nation's history. After more than two decades of unbridled faith in the power of markets and the efficiency of unregulated private industry, the American public is finally beginning to realize what many of us have known all along: to have democracy, corporations must be made accountable to the people.
Every day, we read a new case of (mis)adventures in accounting, corporations that put profit over patriotism, or another story about a company executive who made millions while ordinary employees lost everything. Poll after poll shows that the American people are losing their faith in big business. On Capitol Hill, legislators are drafting bills left and right to prevent another Enron. They say they want to reform the pension system, to regulate the accounting industry, and to clamp down on the securities industry, after years of letting the industries have their way.
In short, the possibility of meaningful corporate reform hasn't seemed this real since the Great Depression.
To help you take advantage of this historic moment, we have created a weekly digest.
Each week, we will provide you with the latest information on what is being proposed to reform big business and what is being said about corporate America, including plenty on the latest fallout from the Enron scandal. We will offer you a selection of articles and editorials on Enron and corporate reform. We will give you tips and ideas for reeling in corporate power. And we will keep you up to date on our own campaign for corporate reform, as well as what other groups are doing to reclaim democracy from corporate control. Meanwhile, we hope that you will keep us up to date on what you are doing on corporate reform so we can connect you with other people who are working in similar areas and together build a giant network capable of fighting big business. E-mail Jacob Harold with your news.
To enjoy future editions of Citizen Works' Corporate Reform Reporter by email, sign up now:
THE WEEK IN WASHINGTON:
While the Senate Commerce Committee drew most of the attention last week with its hearty grilling of former Enron CEO Jeffrey Skilling (who still denies any wrongdoing), a few notable proposals slipped under the mainstream radar.
In perhaps the most promising piece of post-Enron legislation yet, Rep. Dennis Kucininch (D-OH) unveiled H.R. 3795, a bill that would create a Federal Bureau of Audits. As part of the Securities and Exchange Commission, the FBA would be responsible for conducting audits for all publicly traded companies.
This is what Kucinich had to say in a statement:
"The problem is that for-profit, private auditors have an inherent conflict of interest. They're hired and fired by their audit clients. If their draft audit doesn't please the firm they are auditing they may lose future business unless they change their calculations to please the firm. As a result, auditors have a strong incentive to sign off on substandard financial statements rather than risk losing a client...The integrity of the audit is undermined by the profit-seeking motive of the private auditing firm."
Click here to read more about this bill.
Last week also saw the first congressional resolution calling for a special counsel to investigate Enron, House Resolution 333. The call came from Rep. Bob Filner (D-CA).
The resolution notes the financial connections between Enron and President Bush and asks for a special counsel to look into: 1) the relationship between Enron and the manipulation in the stock market of its value for shares; 2) the relationship between contributions by Enron to the President, the Vice President, Cabinet officers, and other Administration officials and Enron's rise and fall; 3) the influence of Enron on Federal and State legislation, including in particular the effort to deregulate the energy markets; and 4) the relationship between Enron and the Federal and State regulatory system.
Only the Justice Department can appoint a special prosecutor. Attorney General John Ashcroft, who received almost $60,000 from Enron executives in the last election cycle, has already recused himself from the investigation.
This is what Rep. Filner had to say to Congress:
"We know the connections, close connections, between this administration and Enron. It was those connections that caused this scandal, and it was the connections between Enron and State legislatures and State legislators and State regulatory commissions and Federal regulatory commissions that caused their success."
"Not only the failure of Enron is what ought to be investigated, but why they flew so high for so long and allowed the stealing of so many billions from so many people."
The Republicans, meanwhile, last week introduced a pair of similar retirement security bills, both modeled on President Bush's proposals. Sen. Tim Hutchinson (R-AR) introduced S. 1969, the "Pension Security Act of 2002" and Sen. Charles Grassley (R-IA) introduced S. 1971, the "National Employee Savings and Trust Equity Guarantee Act."
Both bills encourage more diversity in retirement plans, require 30-day notice of any "blackout" period, and place fiduciary responsibly on the employer during a blackout.
Hutchinson's bill bans insider trading during "blackout" periods. Grassley's bill puts a 20 percent excise tax on such trades. Both bills also require employers to provide employees with quarterly statements on the value of their retirement plans. Hutchinson's bill calls for employers to provide investment advice. Grassley's bill calls for retirement education instead.
This is what Sen. Hutchinson had to say in a statement:
"This legislation would protect workers by giving them freedom to manage their own retirement savings, fair notice of any blackout period, better access to sound investment advice, and is consistent with the retirement security principles I previously outlined."
This is what Sen. Grassley had to say to Congress:
"For those in the business community who are alarmed about the large number of proposals, including mine, making changes to this area of the law, I would urge caution. This bill is not written in stone. Further refinements will be made to it."
To view Citizen Works' complete summary of post-Enron legislation,click here.
Off the hill, the AFL-CIO is encouraging its members to send a fax to Enron and corporate creditors Citigroup, J.P. Morgan Chase, Wells Fargo and Bank of New York and to tell them to support full severance packages for laid-off Enron workers.
Two groups, Democrats.com and Moveon.org, have each established online petitions calling for a special prosecutor to handle the Enron investigation.
NEWS AND VIEWS:
W.T.O. Pact Would Set Global Accounting Rules
By ANTHONY DePALMA, New York Times
As Congress and regulatory officials consider ways to tighten auditing and accounting rules to prevent a repeat of the Enron debacle, a little- known global agreement that places untested new requirements on the domestic regulation of professional services like accounting is quietly advancing - with the help of firms like Arthur Andersen, Enron's much-criticized auditor.
The new rules would give the World Trade Organization oversight of the domestic regulation of accounting. Any new national regulation could be challenged by other countries as unfair if it was "more trade restrictive than necessary."
Fund Managers Weigh Activist Role Reforms: Investors debate their involvement in shaping corporate behavior in the post-Enron era.
By JOSH FRIEDMAN, Los Angeles Times
Like millions of Americans, the typical stock mutual fund manager may be outraged by the corporate scandals that have rocked financial markets in recent months.
But should those managers be compelled to take a stand--with their shareholders' money-against company executives who don't appear to have investors' best interests at heart?
The 75 largest mutual fund companies control 44% of the voting power at U.S. companies, including pension and institutional accounts. Combined, this "constitutes the 800-pound gorilla who can sit wherever he wants to sit at the board table" to demand corporate accountability or change the way firms conduct themselves, he said.
Enron's Global Crusade By JOHN NICHOLS, The Nation The rise and fall of Enron is very much the story of a model global corporation gone awry. It is also an apt illustration of the consequences of the rush to embrace a corporate-sponsored template for economic liberalization: from multilateral free-trade pacts that supersede domestic regulations to privatization, deregulation, International Monetary Fund-ordered "structural adjustments" of national economies and the corrupting interplay of corporate campaign contributions and policy-making that is no longer just a US phenomenon. Democrats use Enron to seize on deregulation
By PETER SPIEGEL, London Financial Times With a second round of Enron hearings beginning this week, more subtle political battle lines are starting to emerge, with potentially more serious, long-term ramifications for policymaking in Washington.
Democrats are beginning to hone a message that the Enron collapse is the result of rampant, Republican-led deregulation that has left wide swathes of the US economy unwatched by federal agencies.
No Recourse: The price of securities deregulation is rapacious financial practices, phony audits and a sham SEC By BARBARA LANGER, Utne Reader Online At a time when the Enron scandal is bringing intense Congressional scrutiny on corporate auditors, SEC chairman Harvey Pitt is quietly proposing to pass the enforcement buck from government back to the private sector. The investing public is sadly mistaken if it thinks that either government, auditors, or companies will back reliable financial disclosure that is legally enforceable. 401(k) proposals fail to address basic problems By KATHY KRISTOF, Chicago Tribune The Enron meltdown has put 401(k) reform at the top of
Congress' agenda, but experts say the proposed remedies don't address many of the shortcomings of the suddenly controversial retirement plans, such as low worker participation and high fees charged by plan administrators.
PUBLIC OPINION According to a poll by the Pew Research Center for People and the Press, 77% of all Americans believe that large corporations hold too much power. The Poll also found that 50% of all Americans believe that government regulation of business is necessary. According to a Gallup poll,
47% of Americans are following the Enron story "somewhat closely" and 23%
are following it "very closely." Roughly half of all Americans
(52%) say the Enron situation is a very important issue. An additional
37% say the issue is somewhat important. The aspect that concerns 63%
of all Americans is "that many Enron employees lost their jobs and their retirement
savings while Enron executives made millions." No other aspect comes close.
Next, at 13%, is "the fact that the actions of Enron executives led a
large corporation to suddenly collapse and go bankrupt" and at 9%, "the
fact that Enron contributed millions of dollars to politicians and may have
expected favorable treatment in return." About a quarter of Americans
say practices similar to those at Enron occur at most large corporations and
about half say they occur at some large corporations. Only 19% would
say that such practices happen at few or no large corporations. About half of
Americans say that the practices at Enron are no worse than what other business
executives have done in the past. According to a Business
Week poll, the percentage of Americans who have "hardly any" confidence in business
leaders is now at 24% up from just 13% in 1999. The same poll also finds that 79% of Americans say company executives put personal interests before employees or shareholders, 73% of Americans say government should regulate companies' retirement plans to prevent future Enron-like debacles, and only 33% of Americans feel large companies have ethical business practices. THIS WEEK'S
ACTION ITEM April 6th is Big Bad
Business Day. Across the country hundreds of people are organizing events
(both big and small) to be a part of a national day of action for democracy
and against corporate rule. Some communities will do rallies, press conferences,
and teach-ins -- others will simply have a small house party to discuss corporate
power. We need your help! Citizen Works has created a step-by-step guidebook
explaining how to do an event in your community. Go to the guidebook
now and stand up to big business. MAKE YOUR
VOICE HEARD White House Comment Line
- (202) 456-1111 Join the AFL-CIO's fax campaign asking Enron and corporate creditors Citigroup, J.P. Morgan Chase, Wells Fargo and Bank of New York to support full severance packages for laid-off Enron workers.
Sign an electronic petition calling for the Justice Department to appoint a special prosecutor on Enron at
Democrats.com
and Moveon.org
White House Fax Line - (202) 456-2461
US Capitol Switchboard - (202) 224-3121
President George
W. Bush's e-mail - president@whitehouse.gov
Vice President
Dick Cheney's e-mail - vice-president@whitehouse.gov
White House Address - 1600 Pennsylvania Ave, Washington, DC 20500
Contact your
senators
Contact your representative
Copyright
© 2001 Citizen Works