In wake of Enron debacle, Bush pushes rules for corporations
WASHINGTON (CNN) -- In another effort to distance his administration from the Enron collapse, President Bush on Thursday unveiled a 10-point plan that he says will provide investors with more information about a corporation's financial performance and result in more corporate accountability.
The president outlined his plan during a morning event in which he also presented awards for excellence in business, the Malcolm Baldrige National Quality Awards.
"Reform should improve investor confidence and allow our economy to flourish and grow," Bush said. "Our goal is better rules so that conflict, suspicion and broken faith can be avoided in the first place. Reform should begin with accountability and reform should begin at the top," he said.
Under the president's proposal, top executives who are found to engage in "serious misconduct" would be barred from serving on the boards of any publicly held corporations, according to a fact sheet obtained by CNN. Such a move would require congressional legislation.
The president proposes that leaders lose any bonuses or other compensation based on incentives if they are found to be profiting from "erroneous financial statements," the White House fact sheet says.
Bush also calls on CEOs to personally vouch each quarter for the company's financial statements. Currently, corporate chief executives typically sign only a "bare-bones" certification about the company's annual financial statements, the White House said.
Bush's plan also requires company officers to tell the public promptly when they buy or sell stock for personal gain. Currently, corporate leaders can wait as long as a year or more without revealing personal transactions within the company.
"The goal of these [proposals] is to increase corporate responsibility," an administration official said. The official said Bush has repeatedly talked about an "era of responsibility" and how that extends to corporate leaders.
Bush touched on this theme in his State of the Union address. Although he never mentioned Enron by name in that speech, he said, "Through stricter accounting standards and tougher disclosure requirements, corporate America must be made more accountable to employees and shareholders and held to the highest standards of conduct."
In other comments to reporters, the president has expressed anger about the collapse of Enron, suggesting that investors were not given all the facts, and citing how his mother-in-law lost about $8,000 in her Enron investment.
To help investors in the wake of the Enron debacle, the president wants corporations to provide quarterly information to shareholders about a firm's "financial performance, condition and risks."
To prevent some of the accounting problems associated with Enron -- which have centered around the Arthur Andersen accounting firm and its auditing and consulting work for Enron -- the president calls for a "stronger, more independent audit system."
Bush's plan would require the Securities and Exchange Commission (SEC) to establish guidelines for audit firms to prohibit an auditor from performing any other service, including consulting, to a client if those services would compromise the independence of the audit.
The president is also calling for the creation of an independent regulatory board, under the supervision of the SEC, to develop ethical standards for the accounting industry.
Bush's plan stems from recommendations from a working group, made up of Treasury, Commerce, SEC and other agency officials, formed after Enron collapsed in December.
The working group continues to meet to review other possible ways to promote more corporate responsibility and better disclosure requirements, an administration official told CNN.
Last month, in another move to prevent an Enron repeat, Bush unveiled proposals to help protect workers' retirement savings.
His pension reform proposals include allowing employees to diversify and invest in noncompany stock after three years of investing in their company's 401(k). The president also calls for "pension parity," which aides describe as preventing corporate leaders from buying or selling company stock when employees and shareholders are barred from making investment changes in their retirement plans.
Enron and its executives were among the largest contributors to President Bush's political campaigns.
While Bush administration officials continue to say that Enron did not get any special treatment in exchange for those contributions, the president's advisers and Republicans are doing what they can to prevent the Enron debacle from affecting the GOP's performance in the November elections.
Meanwhile, the Malcolm Baldrige National Quality Award winners, announced in December, were Clarke American Checks Inc. of San Antonio, Texas; Pal's Sudden Service of Kingsport, Tennessee; Chugach School District in Anchorage, Alaska; Pearl River School District in Pearl River, New York, and the University of Wisconsin-Stout in Menomonie, Wisconsin.
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