The financial scandals at Tyco, Worldcom and Enron are still painful memories for many investors. Former Securities and Exchange Commissioner Arthur Levitt has called on Congress to do more to make corporate officials more accountable, and corporate financial statements easier to understand. New Hampshire Public Radio?s David Darman checked in with the four Congressional candidates to find out what they think of Levitt?s proposals.
New Hampshire?s candidates for Congress are united in their support for the Sarbanes Oxley Act. That bill became law in July. It prohibits accounting firms from offering both audits and management consulting services. GOP first district candidate Jeb Bradley neatly sums up the positions of all the candidates.
Bradley 36 07 accounting firms or auditing firms that are serving as consulting entities to companies I think led to some of the problems we?ve seen on wall street. And so there should be separation there. 36 21
The new law also prohibits corporate boards from looking the other way when company executives engage in criminal activity. And the candidates agree that cozy relationships between board members and executives should not be tolerated. 1st District candidates Martha Fuller Clark, a Democrat, and Republican Jeb Bradley agree that they would consider more legislation to keep board members independent. But 2nd District Congressman Charlie Bass, also a Republican, says people should give the new Sarbanes Oxley bill a chance.
Bass 24 ?it establishes new requirements that prohibit conflicts of interest from a member of one board to another. There isn?t really any further legislative action necessary on that. 24 19
Greater differences emerge between the candidates in their views of how government should treat investment banks. A few stock analysts have admitted they recommended investors buy money losing stocks and bonds, underwritten by the analyst?s bank. These disclosures have led Arthur Levitt to call for stock research to be totally independent of the investment banks. Second District Democrat Katrina Swett and her First district colleague Martha Fuller Clark say separating may be unnecessary. Katrina Swett:
Katrina 12 123 I don?t know if its impossible for those companies to have a separate and truly segregated analysis department where there?s a good Chinese wall that isn?t breached. I don?t know that we need to, as a matter of law, bifurcate those duties. 12 138
Clark?s Republican opponent in the First District goes further on investment banks than the Democrats. Jeb Bradley says he is willing to consider breaking research departments entirely away from investment banks.
Bradley 35 there needs to be whatever happens, absolute transparency for investors?35 11 and when research gets done, it needs to be above board, and not with?conflicts of interest. So, perhaps a separation is a good thing. 35 28
The candidates mostly agree that stock options need to be treated differently in corporate accounting. Many executives reaped huge payouts in stock options during the market boom of the 1990?s. But these payments were not revealed in corporate financial statements. Instead, they were noted in only in footnotes to the statements. First District Candidate Martha Fuller Clark says options should be deducted from revenues to give investors a clearer financial picture.
Clark ?yes. 02 17 but in the long run, it will.. I think invigorate a sense of fairness a sense of trust in the markets. So it makes good sense to me.
Second district Congressman Bass agrees that more disclosure is needed for options. But he says the accounting profession should make new rules.
The four candidates also support efforts to stop corporate abuses of employee retirement plans. Republican Charlie Bass says Sarbanes Oxley has measures to protect employees. But his opponent, Democrat Katrina Swett, says greater change is needed.
13 37 certainly in the case of enron we saw that pensioners were for a period of time, precluded from being able to sell their stock at the same time that top managers and ceos were unloading fortunes worth of enron stock. And they were locked in through their 401 k plans. So, we need clearly reform there, and I think its going to be a high priority on the next congress?s agenda^.13 58
Each of the candidates except Charlie Bass supports further change in pensions and financial disclosure laws. But the momentum for such legislation has died down in Congress. American voters elect the next Congress on Tuesday. Their votes will help determine whether further legislation gets debated.
