Kerry and corporate accountability

[hedda_foil]

Matter of Interest
by Jonathan Cohn

http://www.tnr.com/doc.mhtml?pt=FyIZeGy6cAADhnOzaQedxR%3D%3D

The issue is corporate accountability, a regular staple of Kerry's campaign rhetoric. "From Enron to WorldCom to the mutual fund scandals that have shaken the trust and savings of Americans, a widespread creed of greed on Wall Street has been met by a look-the-other way attitude in the Bush White House," Kerry said in another recent speech. "It's time our government sent a different message." Back in February, 2002, when former Enron CEO Ken Lay appeared before members of the U.S. Senate, Kerry was even more harsh: "Americans everywhere are shocked that you have no answer to explain how Enron executives escaped this sinking ship with their fortunes intact while thousands of everyday working Americans were left holding the bag, robbed of their retirement savings."

But Kerry shouldn't be shocked at all. Back in 1995, he backed a controversial measure that severely limited the ability of investors to sue companies engaged in fraudulent accounting practices--a legal change widely believed to have contributed to the accounting scandals of the last few years. The law, which consumer groups opposed vociferously precisely because they feared it would lead to white-collar crime, was part of Newt Gingrich's Contract With America. Yet Kerry voted for it anyway, not once but twice--the second time overriding a veto by President Clinton.

The law in question is the Private Securities Litigation Reform Act of 1995. At the time it came up for debate, the bill's supporters said it would curb frivolous lawsuits against companies whose stock prices had fallen but who had engaged in no wrongdoing. According to company executives, these "strike suits" had cost them millions in litigation expenses while making it impossible to communicate freely with potential investors (because they feared every statement might be used against them later in court). Strike suits frequently ensnared accountants and financial firms, which helps explain why they, too, backed the law. Partly because the volatile high-tech economy of the 1990s created such ample opportunity for strike suits, even some of the bill's harshest critics deemed its basic goals worthwhile.

But the question in 1995 was no so much whether to reform securities litigation as how, and critics complained loudly that this proposed law went too far. Particularly worrisome was a proposal requiring plaintiffs to show firm proof of wrongdoing before a case could go forward. (The old law had a much lower threshold for evidence, on the theory that it was frequently impossible to get hard evidence without going through the pre-trial discovery process.) The U.S. Public Interest Group argued that the measure amounted to a "license to lie for white-collar crooks"--a sentiment Clinton would later echo in his veto message. The measure, he said, would "close the courthouse doors" to investors who'd lost money thanks to unscrupulous companies and their accountants.

[Taeger]

1. Ouch

Another reason not to vote for Kerry.

Corporate CEOs are accountable to NO ONE. They appoint the corporate boards who are supposed to supplying oversight.

NEW RULES:

1) CEOs aren't allowed to appoint board members. Stockholders who ARE NOT members of the management team should appoint board members.

2) CEOs may not serve as board members for other companies. Nor should any executive officer of a company.

3) EVERY corporate board should include an person elected by everyone who DOES NOT supervise other employees. That is, a representative for someone who IS NOT a manager.

4) Every corporate board should include a representative elected amongst the communities in which the corporation has facilities that employ 20 or more people.

5) Corporations should not be able to choose their auditors. Auditors should be chosen at random from pools of firms that register with the US Government. Companies who do auditing work can't do anything else like "consulting" (bribes).

6) All corporate mergers should be PRESUMED to be anti-competitive. It would be the job of the merging companies to PROVE that they would not pose an unfair market position.

Finally a constitutional amendment.

All for-profit corporate bodies are considered citizens non-citizens and are not entitled to the rights of citizens. Corporations that engage in interstate commerce must be chartered by the federal government who has full power to regulate all activities of a corporation and hold it's officers liable for the activities of the corporation.

[Feanorcurufinwe]

2. It is false to say that

the Private Securities Litigation Reform Act of 1995 was part of Gingrich's 'Contract on America'

See for yourself:

http://www.geocities.com/way2muchsense/prior_issues/contract.html

[AP]

3. My general feeling about issues like this is that although I'm sure that

Kerry gave Republicans less than they wanted, I'm worried that America is not going to get the message that we really need a break from the past on how DC has been giving businesses EXACTLY the political landscape they want for the past three decades.

How can Kerry have any legitimacy on these issues and argue for a real break with the record he has?

[Cheswick2.0]

4. Jeesh

How sleazy does pro-business legislation have to be before Clinton vetos it?
Even Arlen Spector and John McCain voted against it.



<<<During the initial debate over the bill on the Senate floor, Kerry, a member of the committee with jurisdiction over banking, acknowledged the legislation's shortcomings. "My preference also would have been to include stronger investor recovery provisions," he said, noting that he had supported failed Democratic amendments that would have softened the bill's impact. But unlike 26 of his Democratic colleagues and a handful of Republicans (Arlen Specter and John McCain among them) for whom such problems were cause enough to oppose the bill, Kerry embraced it anyway. "On balance," he said, "this legislation should lead to the creation of a more favorable climate for investors and businesses." After Clinton vetoed the bill, Kerry voted to override the president--a motion that passed the Senate by one vote. It was the first time a Clinton veto failed, leaving the White House to say merely that Clinton "hopes that the unintended consequences of the legislation actually do not occur."

As we all now know, the consequences did occur. The Enron case is just the most famous example of a company cooking its books while accountants looked the other way, costing investors hundreds of millions of dollars (not to mention throwing thousands of employees out of work). And while it would be grossly unfair to blame it all on the Securities Reform Litigation Act, many experts think the law played a critical role in the scandals--partly by insulating auditors and other would-be watchdogs from the threat of lawsuits. It "substantially reduced the liability of accountants and other corporate gatekeepers," says Columbia University law professor John Coffee, an expert on securities regulation who advised the Clinton White House on this issue in 1995. "It's reasonable to infer that ... the extent that auditors no longer felt the pressure of litigation, it became easier to acquiesce at the margins to a fraud that they might not otherwise allow to happen." >>>

[NashVegas]

5. "Meet the New Boss / Same as the Old Boss"

Gonna be loverly.

[sandnsea]

6. This was a bad vote

It's intent was actually to get companies to release more information so investors could make better choices. If the law suit requirements were eased a bit, companies would be more likely to be more forthcoming. I'm sure many were. But as with anything, there's always the 3% rule. 3% of any given population will screw everything up for the rest. In the case of stocks, 3% can financially destroy alot of people's lives. It was a bad decision.