Bush Administration Stalls Major Corporate Reform to Please Donors
Oct. 27, 2004
Bush Administration Stalls Major Corporate Reform to Please Donors
53 Rangers and Pioneers, and $55 Million in Contributions From Companies Opposed to the SEC Reform, Help Fuel Bush Election Efforts
WASHINGTON, D.C. – The Bush administration, on behalf of some of its biggest financial backers, has worked to delay and debilitate a reform measure that would hold CEOs and corporate boards more accountable to their shareholders, according to a new report issued today by Public Citizen.
On October 14, 2003, after a series of corporate scandals, the Securities and Exchange Commission (SEC) formally introduced the so-called shareholder access rule, a modest reform measure that would make it easier for concerned investors to place their own nominees on a company’s board of directors. More than a year later, the rule still hasn’t been approved by the SEC.
The proposed rule – which received the largest number of comments in SEC history, most of them favorable – was supported by institutional investors, state treasurers, unions, corporate governance experts and even SEC Chairman William Donaldson, who called it “long overdue.” But the rule was vehemently opposed by the CEOs of America’s largest corporations and their main trade associations, the Business Roundtable and U.S. Chamber of Commerce.
Fifty-three senior executives from corporations opposed to the rule qualified as “Rangers,” “Pioneers” or “Super Rangers” – the honorary titles given to big-money bundlers who have collected at least $200,000 or $100,000, respectively, for the Bush campaigns or $300,000 for the Republican National Committee (RNC). These rainmakers personally rounded up at least $8.3 million – probably much more – for Bush campaign efforts in 2000 and 2004.
“President Bush publicly complains that corporate crime scandals have undermined job growth and the economy,” Public Citizen President Joan Claybrook said. “But behind the scenes, he has helped strong-arm the SEC to bury a much-needed corporate reform measure that would give shareholders more influence on the makeup of corporate boards, which would help deter insider deals and conflicts of interests.”
The 205 corporations opposed to the shareholder access rule – defined as members of the Roundtable, Chamber or unaffiliated companies that filed comments against the rule – and their employees contributed $55.5 million to Bush’s campaigns, the Bush-Cheney Inaugural Committee and the RNC during the past three election cycles.
The new report, Corporate Cronies: How the Bush Administration Has Stalled A Major Corporate Reform and Placed the Interests of Corporate Donors over the Nation’s Investors, exposes the efforts of the Bush administration and the business lobby to pressure SEC Chairman Donaldson to back down on the shareholder access rule. The report is available at http://www.WhiteHouseForSale.org.
“The Bush administration faced a choice of whether to side with the CEOs or the shareholders,” said Public Citizen researcher Conor Kenny, the primary author of the report. “This is a classic case of money and access winning out over the best interests of average citizens.”
Among the report’s major findings:
- Business Roundtable President John Castellani, then-Executive Director Patricia Engman and at least eight executives from Business Roundtable member companies met three times with SEC Chairman William Donaldson and four times with two other SEC commissioners or staff after the rule was passed.
- The Business Roundtable also pressured the White House, Treasury Department, Office of Management and Budget, Commerce Department and Congress to stop the shareholder access rule. Federal lobbying disclosure forms show that the Business Roundtable spent more than $12.8 million lobbying on the rule and other issues in 2003 and the first half of 2004, the most recent data available.
- The Bush administration dispatched Treasury Secretary John Snow – a former chairman of the Business Roundtable – to pressure Donaldson and other SEC officials to weaken the shareholder access rule. According to multiple SEC officials, Snow let it be known that the White House did not want the rule to proceed.
- Under pressure from the Bush administration, the Business Roundtable and the U.S. Chamber of Commerce – which threatened to sue the SEC if the measure were implemented – Donaldson has delayed and proposed weakening the rule. Donaldson now says he won’t move forward without “meaningful consensus” and that any further action is unlikely before Election Day – if at all.
The report also shows that the corporations opposed to the shareholder access rule exemplify the problems the rule seeks to address. Many of the companies have questionable but lucrative financial relationships between top executives and the board of directors, exorbitant CEO compensation packages, and a poor record of responding to shareholder concerns.
Public Citizen’s analysis of board ratings provided by the Corporate Library, an independent research firm that specializes in corporate governance issues, found that 46 percent of the corporations opposed to the rule received a “D” or an “F” for “Overall Board Effectiveness”; 29 percent of the corporations gave side deals to their directors to provide consulting, legal or banking services – a conflict of interest; 63 percent award their executives questionable or inflated compensation packages; and 76 percent do not expense their stock options, which allows companies to inflate their earnings.
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To read the report, click here.