FOR IMMEDIATE RELEASE:
Tuesday, July 9, 2002
Nancy Coleman, Karen Conner,
or Stephaan Harris, (202) 775-8810
Faux urges curbs on corporate lawlessness
At a news conference convened by Sen. Paul Sarbanes in the U.S. Capitol today, Economic Policy Institute President Jeff Faux warned that the scandals plaguing one corporate giant after another are likely to have serious repercussions for the American economy unless Congress acts to rein in corporate abuses.
Following are excerpts from Faux’s comments at the event.
“As this horrifying story unfolds of corruption at one corporate giant after another, it is clear that this is not just an issue of a few individuals consumed by greed. It is not news that financial markets are motivated by greed. What we are witnessing is lawlessness that has been made possible by inadequate regulation and enforcement.
“Thousands of workers have lost their jobs and their retirement savings through pensions and 401(k)s. For example, three pension funds are now stuck with $1.25 billion in WorldCom bonds now worth about 13 cents on the dollar. The damage so far is huge – and this may be the tip of the iceberg.
“We’re seeing evidence of another kind of damage that could spell dire results for our economy. The pillar of our economic strength and influence in the world is investors’ trust that the American government effectively regulates corporations against fraud, abuse and crony capitalism. It is this trust that makes foreign investors willing to continue to finance our annual $400 billion trade deficit.
“Without that trust, we are entering a new danger zone. Already there are signs that some foreign money is being pulled out, with risk premiums being built into the price of U.S. securities. There is a huge amount at stake and a simple promise from corporations to do better at self-regulation will not be enough to restore trust.
“We need a strong, immediate message from the U.S. government that it will not tolerate the kinds of practices that have been coming to light. The government needs to create credible oversight of the accounting industry and prohibit conflict of interest among auditors, stock analysts, and other financial consultants. It must establish legal accountability in financial reporting for CEOs and boards of directors. It must prohibit managers from selling company stock when workers can’t. There must be full and open disclosure of all insider loans and trades.
“And the government must give these rules real teeth – by giving the SEC adequate resources for enforcement.
“The challenge the government must meet is critically important and the bill that Senator Sarbanes has introduced is crucial. We must restore trust and confidence in the U.S. capital markets – and that means we must restore the rule of law to America’s corporate boardrooms and executive suites.”
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The Economic Policy Institute is a nonprofit, nonpartisan economic thank tank founded in 1986. The Institute can found on the web at http://www.epinet.org.