George W. Bush: Corporate Confidence Man

President Bush sure likes to talk tough. To hear him tell it, "My administration will do everything in our power to end the days of cooking the books, shading the truth, and breaking our laws." He wants to restore "confidence" so much that he used the word 13 times in his speech on Wall Street, and nine times at a press conference the day before.

Despite all the rhetoric about getting "tough" on corporate crime, Bush’s Corporate Responsibility program involves a long list of tepid reforms -- what you’d expect from a president desperate to keep the current crisis from becoming a major political liability for his party and his presidency.

There are some good incremental reforms related to corporate governance and reporting contained in Bush’s proposal, such as prohibiting company loans to executives. But most of the proposed reforms are the kind of false posturing that corporate America has proven so capable of in recent years.

Take, for example, Bush’s cornerstone Executive Order establishing the Corporate Fraud Task Force. It sounds good. But there’s no additional funding or staff, just a directive that a bunch of government agencies talk to each other more often about the things you’d expect they’d be talking to each other about a lot these days -- securities fraud, mail and wire fraud, money laundering and tax fraud.

Or take Bush’s call to increase the SEC’s budget by $100 million; a pittance compared to what SEC observers say is needed. Just two weeks ago, the House voted 422-4 to increase the SEC’s grossly underfunded $430 million budget by 77 percent. Bush’s increase barely matches a request made in March by SEC Chair Harvey Pitt to increase the commission’s staff and pay; a request that was denied.

Bush praises the House for "passing needed legislation to encourage transparency and accountability in American business." But the Republican bill he refers to does nothing of the sort -- it punts the issue to the SEC for further study. He says he wants the SEC "to adopt new rules to ensure that auditors will be independent," but he refrains from supporting a bill currently on the Senate floor (the Sarbanes bill) that would do this by separating auditing and consulting and rotating auditors.

Bush also praises the House for passing pension reforms that will "expand workers’ access to sound investment advice, and allow them to diversify out of company stock." But that bill requires workers to wait three years to diversify out of company stock -- far too long when executives can sell whenever they want. Bush says, "What’s fair for the workers is fair for the bosses." But the House Republican bill that he praises actually would remove a provision that requires employers to offer the same plan to all employees.

Many of Bush’s proposals are articulated in vague language that would presumably be subject to much interpretation. For instance, the Bush plan includes: "require corporate leaders to tell the public promptly whenever they buy or sell company stock for personal gain." But what does he mean by "promptly" -- waiting 34 weeks?

What’s more telling are the things that Bush leaves out. For example, he says that an executive "whose compensation is tied to his company’s performance makes more money when his company does well; that’s fine. And that’s fair when the accounting is above-board." But although Bush says he wants the issuance of options approved by shareholders, he doesn’t say he wants them expensed. Allowing stock options not to be expensed essentially means allowing companies to continue issuing stock options to top executives without telling investors of the cost, cutting into profits to enrich the top brass while diluting shareholder value.