CNN LIVE EVENT/SPECIAL
Bush Speaks at Washington Hilton
Aired March 7, 2002 - 11:07 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HARRIS: In the meantime, we want to take you to Washington. President Bush is beginning his remarks right now. He is appearing here at the Malcolm Baldrige National Quality Awards ceremony this morning. He's going to be outlining a 10-point plan for protecting shareholders from being Enron-ized if you will, in the future.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And I want to welcome five more organizations to your ranks.
The school districts, the University of Wisconsin-Stout, as well as the fine symbols of entrepreneurial spirit in America, (inaudible) of Tennessee, and of course Clark American Checks (ph) represented by some rowdy Texans.
This is a high, high honor. I know you all understand what a big deal this is, having gone through the process. It is an important award, and I congratulate you all so very much. The award goes to organizations rather than any single individual, and that's important to note. As we've seen today, success happens in an atmosphere of teamwork, common values, and trust.
An organization needs a good idea, a good product or a good service. Certainly needs a good strategic plan, but more than anything, it needs good people, men and women of integrity, who will understand their duties to each other and to the public interest.
And this is true throughout our entire economy. The free enterprise system draws upon the best in people, creativity, ingenuity, energy, a desire to make life better for ourselves and for others.
The whole design of free market capitalism depends upon free people acting responsibly. Business people must answer not just to the demands of the market, or self-interest, but to the demands of conscience.
The bottom line of the balance sheet defines a business' goal, but not the sum of responsibilities of its leaders. Management should respect workers. A firm should be loyal to the community, mindful of the environment. In America, by far, most businesses fulfill their responsibilities. They do not cut ethical corners or neglect workers or disregard community standards. A good business finds opportunities and makes the most of them, and a good business always respects the boundaries of right and wrong.
In our country, the law defines many of these responsibilities, from workplace safety to environmental protection. For publicly held corporations, the law goes further, defining standards of disclosure with independent certification by auditing firms.
We've seen lately just how important these standards are and the harm that can follow when they are ignored.
Exactly where the blame lies may take a long time to determine, and legal judgments are for regulators and for courts. But this much is clear.
To properly inform shareholders and the investing public, we must adopt better standards of disclosure and accounting practices for all of corporate America.
The reason that a single bankruptcy can cause so much concern in America is that more Americans than ever have invested their money in public corporations.
Today, about 80 million Americans own stock, either individually or through their pension plans. This is one of the causes for the expansion in personal wealth over the past 20 years. This has been an incredibly positive development for America.
Stock ownership allows citizens from all walks of life to own a part of the economy and to share in its growth.
The people who run public companies owe a special obligation to these investors, many of whom have put their savings and future security on the line.
Corporate officers must perform their duty in good faith, to the best of their abilities. They must disclose relevant facts to the investing public. And they must focus on the interests of shareholders who are the real owners of any publicly held enterprise.
I recognize that the basic rules of corporate law are made by the states, and that's as it should be.
But Washington has responsibilities as well. The buying and selling of publicly held shares is regulated by the federal government. And today, I call upon the Securities and Exchange Commission to take action.
Existing regulations should be clearer. Penalties for wrongdoing should be tougher. Reforms should improve investor confidence and help our economy to flourish and grow.
It is important to provide sound regulation and remedies where needed without inviting a rush of new lawsuits that exploit problems instead of solving.
Our goal is better rules so that conflict, suspicion and broken faith can be avoided in the first place.
Reforms should be begin with accountability. And reforms should start at the top. The chief executive officer has a daily duty to oversee the entire enterprise, the entire firm and therefore bears a unique responsibility for serving shareholder interests.
Currently, a CEO signs a nominal certification of annual financial statements and does so merely in his capacity on behalf of the company.
In the future, the CEO's signature should also be his personal certification, vouching for the veracity and fairness of the financial disclosures. When he signs a statement, he's giving his word and should stand behind it.
Often times, businesses base executive bonuses on financial statements. If, however, a financial statement turns out to be grossly inaccurate or the result of serious misconduct, those bonuses should be returned to the company's treasury on behalf of its shareholders.
Corporate officers should not be allowed to secretly trade their company stock. Every time they buy or sell, they should be required to tell the public within two days.
The Securities and Exchange Commission should be able to punish corporate leaders who clearly abuse their powers by banning them from ever serving as officers or directors of publicly held corporations.
We must also do more to safeguard the rights of investors. America has the best system of corporate disclosure. Yet the interests of the average investor are sometimes overlooked, especially the need for thorough and timely information about firm performance. And some corporations have used artful and intricate financial arrangements to hide the true risks of the investment. We need to get back to basic capitalism.
In a system based on the willingness to take risk, investors need to know the true nature of the risks. The investor has the right to true and fair picture of assets, liabilities and income. Management has a good-faith obligation to provide that information, attracting investment by building on strengths, not by clever concealment of weaknesses. And to further ensure that information is reliable, we will need reforms within the accounting profession.
Auditors are a critical external check on management. And we must ensure that the integrity of their work is never compromised. Accounting is one of the most basic and one of the most respected professions in our country. And it can help protect its own integrity by developing and enforcing clear standards of conduct.
The profession also needs an independent regulatory board to hold accounting firms to the highest ethical standards, and the SEC should exercise more effective and broad oversight of accounting standards. The SEC should also do more to guard against conflicts of interest, requiring, for example, that an external auditor not be permitted to provide internal audits to the same client.
And finally, auditors should do more than evaluate a company by minimum standards. Instead, the auditors should compare the company's financial controls to the best industry practices and give those findings to the audit committee.
You know, we are passing through extraordinary times here in America. We fight a war, a real war, to protect our homeland by bringing terrorists to justice. We stand strong against evil abroad. I mean, we are standing strong and determined and united against evil.
We're finding strength at home through the gathering momentum of millions of acts of kindness and generosity and goodness, neighbors helping neighbors, Americans adhering to the age-old call to love someone just like you'd like to be loved yourself.
America is ushering in a responsibility era, a culture regaining a sense of personal responsibility where each of us understands we're responsible for the decisions we make in life.
And this new culture must include a renewed sense of corporate responsibility. If you lead a corporation, you have a responsibility to serve your shareholders, to be honest with your employees. You have a responsibility to obey the law and to tell the truth.
Business relationships, like all human relationships, are built on a foundation of integrity and trust. When those values are practiced and expected, our economy and our country are stronger. We're seeing some challenges and some changes in American business, in American enterprise, yet this annual presentation is a reminder of things that must never change.
The passion for excellence, the drive to innovate, the hard work that goes with any successful enterprise, they need to be open -- the call for integrity.
This year's Baldrige award winners have shown these qualities and have taken their place in a distinguished line of leaders.
Once again, my congratulations to you all.
May God bless your enterprises and may God bless America.
HARRIS: President Bush there speaking in Washington at the Malcolm Baldrige National Quality Awards this morning, and he's expressing his ideas this morning, a 10-point plan here, for protecting the rights of investors.
Let's check in here now with our White House correspondent Kelly Wallace, who's also been listening in.
Kelly, good morning.
KELLY WALLACE, CNN CORRESPONDENT: Good morning to you, Leon.
You know, it's interesting we never hear President Bush mention the word Enron in any of these speeches. Even senior administration officials talking to reporters earlier this morning about the president's plan, never mentioned Enron.
But clearly, the president's initiative in response to collapse of Enron, trying to prevent what happened there from happening again. Thousand of employees losing their life savings. Also a concern, of course, this administration trying to distance itself from the whole debacle. You heard the president talking in quite strong terms, calling for more corporate responsibility. He is basically calling on the Securities and Exchange Commission, the SEC, really to kind of beef up its enforcement of his ideas, such as corporate leaders who are found to be profiting from erroneous financial information. They could lose their bonuses. If they're found to be engaging in serious misconduct, they could lose the right to serve on boards of other publicly held companies.
Really, senior officials say, it's the same thing as really being disbarred, losing your license to practice law if you are in an attorney. The president also saying that in corporate leaders should have tell the public right away if they're buying or selling stocks in that company. And, Leon, as you know, all of these proposal really stem from questions which came out of the Enron affair, questions about if the corporate leader were really telling the truth about the financial statements or profiting on the company's stock, selling the stock when they knew the company was going under.
Lawmakers are praising the president in part, but many are saying he's not going far enough. In particular, they wanted to see a little bit stronger when it comes to the conflict of interests era, drawing more of a line in the sand, preventing auditing firms from also providing consulting services to that same company that they are auditing, so we are likely to hear from Democrats on that, so the president clearly putting out his plan, saying it's time for corporate leader to be held to a higher standard -- Leon.
HARRIS: Yes. And, Kelly, I don't believe that there will be very much argument with the plan the president laid out. We will see how that debate plays out from here.
Kelly Wallace, thanks very much. We'll see you later on.
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