Still Needed: Corporate Reform
It is becoming increasingly apparent these days that corporate reform isn't really happening in Washington. In the last few weeks, we've witnessed a below-the-radar rollback of the Sarbanes-Oxley Act, continued corporate earnings restatements, foot-dragging by a Congress unwilling to move ahead on the next round of critical corporate reforms, and the continuation of brazen Bush administration policies to further deregulate the energy and telecom sectors.
Chances are, though, most people didn't really notice. That's because they've probably been paying attention to the latest developments on Iraq. How cleverly Bush has been able to change the subject.
Whatever happened to all that concern about the more than one million Americans who lost their jobs in the cascading corporate scandals? What about the $175 billion investors lost in their retirement accounts? Have we forgotten already about the despicable behavior by executives at Enron, WorldCom, Tyco?
Not so fast, say more than 200 groups who this week joined forces to release the Unity Platform on Corporate Accountability, a comprehensive outline of specific proposals designed to significantly transform the relationship between corporations and society.
The groups, which include Public Citizen, Global Exchange, the Institute for Policy Studies, Rainforest Action Network, Co-op America, 50 Years is Enough, CorpWatch, the Alliance for Democracy, and Citizen Works, want to make sure corporate excess doesn't go away as an issue until it goes away as a problem.
The Unity Platform "represents a cohesive analysis shared by diverse strands of the grassroots corporate accountability movement," said Charlie Cray, director of the Corporate Reform Campaign at Citizen Works. "Despite the inertia in Washington, it reflects the popular view that there needs to be further and deeper change in how we govern corporations."
"Corporate greed and abuse remains one of the top issues for most Americans," added John Cavanagh, director of the Institute for Policy Studies. "It will come back strong in the months to come."
The groups' agenda calls for public funding of elections, an overhaul of corporate governance, controls on speculative investment, stronger labor and environmental obligations, an end to international corporate welfare and a redefinition of financial accountability, among other proposals.
"We should be at a political crossroads today, developing ways to foster real corporate accountability," said Joshua Karliner, senior adviser to San Francisco-based CorpWatch. "Unfortunately the drum beat of war is drowning out the public outcry against corporate corruption. This not only undermines corporate reform, but also creates a climate in which Bush's agenda to further deregulate big business, one of the principle causes of Enron, may well prevail."
As Wenonah Hauter, director of Public Citizen's Critical Mass Energy & Environment Program notes: "Despite the crushing failure of telecom and energy deregulation, the Bush Administration continues to advocate for increased deregulation of these sectors."
The groups decided to release the platform this week in response to the disappointing corporate reform inertia in Washington, so as to return some energy into the important work of curbing corporate power and greed.
Such a spark is much needed. After all, consider these recent developments:
- Instead of choosing someone with the relevant skills to head the accounting industry oversight board created by the Sarbanes-Oxley Act, Harvey Pitt nominated William Webster, the retired CIA and FBI head whom even the Wall St. Journal described as "Pitt's factotum."
- Bush recently proposed cutting the SEC's budget from the $776 million targeted in Sarbanes-Oxley to $568 million. Even Harvey Pitt has said this will prevent the agency from undertaking key initiatives to protect investors.
- Under the guise of simplifying the tax code, the Treasury Department hinted to the Washington Post that it is developing plans to scrap the corporate income tax altogether and replace it with a regressive value-added tax.
- Although deregulation has cost consumers billions and resulted in the inefficient allocation of capital due to fraudulent corporate practices, key Bush Administration appointees -- Pat Wood at the Federal Energy Regulatory Commission and Michael Powell at the Federal Communications Commission -- continue to call for increased deregulation. "Wood is pushing his Standard Market Design despite the pleas by 18 states to cease this deregulation nightmare," says Public Citizen's Wenonah Hauter. "And Powell has publicly stated that much of the $2 trillion meltdown in the telecom industry is not the FCC's concern, and instead is pushing for increased deregulation of the Baby Bells."
- International financial institutions continue to subsidize irresponsible corporations like Enron. In the coming weeks, the Inter-American Development Bank is expected to vote on financing $125 million in loans to Enron and Shell for a controversial pipeline in Bolivia.
- Congressional foot-dragging has failed to fix even the most obvious problems of corporate greed, such as a broken pension system and a wave of corporate relocations to offshore tax havens. Meanwhile, little has changed in Corporate America. According to an October 2002 study of 1,245 U.S. firms by the Investor Research Center, 72 percent of fees paid by firms to their auditors were actually for non-audit services, exactly the same percentage as one year ago. And the General Accounting Office (GAO) recently reported that corporate restatements rose from 225 in 2001 to an estimated 250 in 2002. In the last week alone Qwest, AOL, Tyco, MTS Systems and Bristol-Myers Squibb have all announced new restatements.
Lee Drutman is the Communications Director for Citizen Works.