July 25, 2002
Corporate Crime Bill a Good Start, But Congress Must Pass McCain-Levin Stock Options Requirement
Statement by Public Citizen President Joan Claybrook
The conference committee bill passing the House and Senate today is a good start to counteract this corporate crime wave, which was enabled by the broad corporate campaign to deregulate business. It will toughen the standards for accounting, change the rules to deter fraud against investors, authorize criminal penalties for top executives and put more federal cops on the regulatory beat. Sen. Paul Sarbanes (D-Md.) deserves enormous credit for developing this legislation land persisting in overcoming a huge corporate lobbying campaign to prevent its passage.
But the measure omits an essential ingredient that would eliminate a prime incentive for executives to cook up phony numbers intended to scam investors ? and that is a requirement that companies treat stock options as a business expense that drains profits and reduces shareholder equity. Unless Congress does that before it adjourns, corporations will be free to continue lying to investors about their profits. Investors deserve better.
Sens. John McCain (R-Ariz.) and Carl Levin (D-Mich.) were promised a vote on their amendment to require this commonsense accounting change. This promise must be honored. The senators must be allowed to offer their amendment on “must-pass” legislation this session.
Finally, the bill does little to help investors recover losses experienced because of corporate fraud. The Congress must pass legislation authorizing investors to sue those aiding and abetting fraud, such as accountants, lawyers and bankers, and cutting back on 1995 legislation limiting investors? rights to recourse.