[Congressional Record Volume 148, Number 75 (Monday, June 10, 2002)]
[Senate]
[Pages S5263-S5266]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PENSION REFORM
Mr. BINGAMAN. Mr. President, the front page of today's New York Times
has an article with a title that reads ``Enthusiasm Ebbs for Tough
Reform in Wake of Enron.'' That headline points out a political
challenge that those of us in Congress have to deal with over the next
few months; that is, the challenge to enact meaningful legislation
while this terrible catastrophe which befell many employees and
investors in relation to Enron is still fresh in mind.
I, for one, am not ready to concede that we cannot take legislative
action to make sure the country's workers are not protected from the
next Enron-type meltdown. We need to take that legislative action. It
needs to be a priority of the Congress. I rise to speak about some of
the elements that legislative action ought to contain.
Hardly a day goes by when we are not hearing about the collapse of
another corporation. It is not just Enron.
I think we have all come to recognize the problem of corporate
mismanagement, the problem of questionable accounting, or actual
dishonest accounting, the problem of misuse or abuse of the tax
provisions early in the law. All of that is, unfortunately, more
widespread than just the Enron example.
These corporate misdeeds, executive malfeasance, accounting
chicanery, unfortunately, provide grist for virtually every front page
we see these days. These stories will not stop on their own. The
problems will not go away on their own. Apparently, the system we have
had in place for a long time is not working as it should. We need to
pass legislation to address these recurring themes or else we will
jeopardize a long-term economic recovery, which I know we are all
hoping very much is in place and scheduled to occur.
I have referred to a New York Times article. Mr. President, I ask
unanimous consent that this article be printed in the Record following
my remarks.
The PRESIDING OFFICER (Mr. WYDEN). Without objection, it is so
ordered.
(See Exhibit 1.)
Mr. BINGAMAN. Mr. President, as noted in the article, Senator Daschle
has indicated he would like to bring a bill to the Senate floor dealing
with these issues before the August recess. I think that is an
admirable goal, one that the entire Senate needs to join.
Unfortunately, the administration and the House and some colleagues in
the Senate have not shown the kind of zeal for these necessary reforms
that is going to be required. I certainly hope the delays and obstacles
that have arisen so far do not prevent us from bringing meaningful
legislation before the Senate.
Let me refer to a couple other articles while I am on the subject. I
was reading these articles over the weekend in Business Week. One is an
editorial in the current edition of Business Week, entitled
``Accounting: Stronger Reforms, Please.'' It is a very interesting
article, one that I think deserves the attention of everyone. Let me
read a couple of paragraphs from it because I think it does make a
point on which all of us need to focus. It says:
If you hoped that the Enron/Andersen scandal would provide
an opportunity for just
[[Page S5264]]
those sort of farsighted regulatory improvements, start
worrying. There are signs that the Bush Administration, under
pressure from the accounting lobby and business groups such
as the U.S. Chamber of Commerce, is willing to support only
mild changes in the current system. And there's a danger that
Congress will acquiesce. The House of Representatives has
already passed a very watered-down bill.
That's wrong. Halfhearted reform is bad for the public, bad
for the economy, and even bad for the accounting industry,
which needs to reestablish its credibility. Instead, we think
the best bet for strong accounting and financial reform is
the legislation proposed by Senator Paul Sarbanes, Democrat
from Maryland, chairman of the Senate Banking Committee.
Sarbanes' draft legislation--which is opposed by Senator
Phil Gramm, the ranking GOP member of the Banking Committee,
and the Bush Administration--would set up a strong private-
sector board to oversee public-company accounting.
It goes on to detail what is in the legislation and to urge that the
legislation be considered and passed by the Congress.
Mr. President, I ask unanimous consent that the editorial from
Business Week's current edition be printed in the Record immediately
following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See Exhibit 2.)
Mr. BINGAMAN. Mr. President, let me also call the attention of my
colleagues to another section in the same magazine called The Barker
Portfolio. It is entitled ``A Three-Point Plan for SEC Reform.'' It is
by Robert Barker, and he goes into some detail about what he believes
is an appropriate set of reforms for the Securities and Exchange
Commission in order that these kinds of problems can be avoided in the
future.
I ask unanimous consent that this be printed in the Record following
my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See Exhibit 3.)
Mr. BINGAMAN. Mr. President, before leaving this general subject, let
me talk a little about a subject on which I have focused in recent
weeks, which is part of this overall corporate mismanagement problem
that we have been talking about, and that is the problem of pensions.
What do we do to preserve the retirement of workers in these companies
that turn out to have cooked the books or to have engaged in some kind
of practice that causes the value of that company to go away?
There are essentially four major issues that I think need to be
focused on regarding retirement security for Americans. Let me put that
chart up and go through the list once more for those who are interested
in this subject.
There are four major areas where we need to concentrate our attention
and where I believe we can legislate in a constructive fashion. First,
we need to have a goal of providing some type of retirement or pension
plan for all workers in our society. There is no reason why a person
should work 25, 30, 35, even 40 years at a job--or a series of jobs,
which is much more common in this day and time--and wind up with no
pension, no income, nothing they can depend on other than Social
Security once they get to retirement age.
Pensions and retirement coverage have not increased as a percentage
of the workforce in the last 30 years. We have recent studies that have
indicated that. About 50 percent of private sector workers actually
have some sort of pension plan today. That is nationwide. The statistic
is 50 percent. My home State of New Mexico, unfortunately, has the
worst statistic of any of the 50 States. The percentage is 70 percent
have no pension plan and are not expecting to have a pension; whereas,
only 30 percent of private sector employees do have some sort of
pension plan.
I can remember the discussions in previous years around here where we
talked about a three-legged stool when it came to retirement security.
We said, when a person gets to retirement, they are going to have three
things to depend upon, including Social Security payments--and we all
want to see those continue. They are going to have their savings, and
they are going to have their pension. The reality is very different
from that model or that ideal that we have described for many years.
The reality is that most people who have worked through their entire
careers--at least in New Mexico where 70 percent have no pension--most
people do not have three legs on the ``stool'' on which they are
planning to sit. They have most likely one leg because they have not
been able to save a significant amount, and they don't have any sort of
pension or 401(k) plan. That is the first issue and the first item on
the chart.
All workers need a retirement or pension plan of some sort. We can do
much more to expand pension coverage to make it more attractive for
employers to provide pension coverage and to make it more available to
workers in our society. We need to get about the business of doing
that.
Second, all workers should have a right to a secure retirement
savings. The problems we have seen with Enron, the problems we have
seen with other corporations, where retirement savings have been
essentially frittered away, or put into stock by employers which turned
out not to have value, need to be fixed. There is legislation that
Senator Kennedy has proposed, which has been reported out of the
Health, Education, Labor, and Pensions Committee that I supported. That
legislation is awaiting consideration on the Senate floor. I hope very
much that we can move to consider that legislation.
In the Finance Committee, we are also looking at legislation which
would help ensure that people who have these pension savings, or who
have a 401(k) plan, can be guaranteed those funds will be there when
they actually retire.
We need to protect employees from conflicts of interest that allow
accountants, analysts, investment advisers, and, in some cases,
employers to act in their own self-interest, rather than in the best
interest of the employee who is supposed to benefit from that
retirement plan.
Third, all workers must have pension portability. One of the problems
today in our workforce and our work careers is that most people will
move from job to job, and over the period of 30, 35, 40 years of work,
an average worker may have 8 or 10 jobs. We need to be sure they do not
lose their pension benefits as they move from job to job. We need to be
sure they can take those benefits with them and that the benefits will
be portable.
Again, we need to change the laws to make that occur on a more ready
basis. I hope very much we can move to legislation to accomplish that.
The fourth item I want to mention is all workers should be treated on
a comparable basis as regards to retirement benefits. We are just now
trying to understand all of the various mechanisms that have been used
in some of these companies to get us to a result which we have seen
over and over where the top executives of a corporation, when the
corporation essentially collapses as a financial matter, where the top
executives walk off with tens and even hundreds of millions of dollars
in deferred compensation, in executive compensation of one kind or
another; whereas the workers for that same corporation may wind up with
nothing in their retirement accounts.
We need to find out what those abuses are. We need to find out ways
to correct them. We need to plug those loopholes in the existing law,
and I believe we can.
Mr. President, let me stop with that. I see other colleagues are
waiting to speak. I believe very strongly this issue of retirement
security needs to be on the agenda of this Congress. I know Senator
Daschle is trying to put together a series of proposals coming from
various committees so that we can consider it before the August recess.
Retirement security is one of the provisions that we would hopefully
give attention to as a result of or in the wake of the Enron scandal. I
hope we can do that. I think the people of the country want to see us
do that.
I close with the article with which I began my discussion,
``Enthusiasm Ebbs for Tough Reform in Wake of Enron.'' We need to prove
that headline wrong and demonstrate that this Congress is committed to
tough reform, and one of those reforms is in the area of retirement
security.
Mr. President, I yield the floor.
Exhibit 1
[From the New York Times, June 10, 2002]
Enthusiasm Ebbs for Tough Reform in Wake of Enron
(By Stephen Labaton and Richard A. Oppel, Jr.)
Washington, June 9.--Six months after the collapse of
Enron, a wave of enthusiasm for
[[Page S5265]]
overhauling the nation's corporate and accounting laws has
ebbed and the toughest proposals for change are all but dead.
A powerful group of lobbyist, playing on partisan
disagreement in Congress, appears to have killed efforts to
impose tight new controls on corporate conduct. And while
some Democrats hope to turn the inaction to their advantage
in the fall elections, other lawmakers say that--barring more
business meltdowns that deepen the stock market's two-year
slump--voters are unlikely to care enough to influence their
ballots.
Bills imposing more stringent accounting standards,
changing the tax and accounting treatment of employee stock
options and setting tougher conflict-of-interest rules for
stock analysts and accounting firms have all fallen victim to
political gridlock.
Corporate America and the stock markets have not waited for
Washington. Instead, they have undertaken a host of changes
in response to the problems highlighted by Enron and
reinforced by corporate and accounting failures in the
telecommunications, cable and energy industries. Investors
have fled companies whose accounting or governance practices
fail to measure up to post-Enron standards. Some Republicans
say all this is evidence that the system is working without
heavy-handed interference by lawmakers.
Congress did much to focus attention on flaws in the
nation's corporate and accounting practices with a series of
investigative hearings earlier this year, the most dramatic
of them conducted by committees in the Republican-led House.
Even so, with the debate over Enron at full boil, the House
adopted a measure in April that rejected the toughest
proposed changes.
Senate Democrats now predict that they will have the votes
to get a broad measure of their own out of the Banking
Committee later this month on a party-line vote, but only by
tempering it to win the support of moderates. Senator Tom
Daschle, the majority leader, is said by lawmakers and his
aides to be committed to trying to move a bill to the Senate
floor before the August recess, in hopes of using the
Republicans' opposition to the measure against them in fall
campaigns.
Even if that bill survives a filibuster threatened by
Senate Republicans, lawmakers and lobbyists say that there is
little chance of reconciling the differences between the
House and the Senate this year.
All of Washington has not been paralyzed. Federal
regulators--spurred in part by state prosecutors--have become
more aggressive on the enforcement front.
In Congress, meanwhile, legislation to modify pension
laws--a response to the enormous losses in the retirement
funds of employees at Enron and other troubled companies--
might have a better chance of passage.
Still, even lawmakers who favor a tough response to the
seeming explosion in business misconduct detect little fervor
among voters for a Washington crackdown. Absent a spate of
further disclosures, they say, the issues may remain too
remote to change many voters' minds.
``The politics will be determined by the circumstances,''
said Senator Jon S. Corzine, Democrat of New Jersey and a
former top executive of Goldman, Sachs & Company. ``If we
continue to see an erosion of the stock market and more cases
like Adelphia and Tyco, then it will be significant. If we
see less, then it may have less of an impact, because these
can become issues that are hard for people like my mom to
understand.''
Other lawmakers, particularly Republicans, say Enron's
moment as a galvanizing issue has quickly passed.
``The feeding frenzy is pretty much over,'' said Senator
Phil Gramm of Texas, the ranking Republican on the banking
committee, who has worked closely with industry lobbyists to
kill many of the Democrats' proposals. ``People started
looking at making all these radical changes and decided there
was a real cost involved and that it would not solve the
Enron problem.''
Mr. Gramm said regulators and the marketplace are already
correcting the excesses exemplified by Enron and its auditor,
Arthur Andersen, relieving Congress of the need to enact
comprehensive legislation.
``A lot of progress has already been made,'' he said. ``The
president has put forward a strong program, the Securities
and Exchange Commission is moving forward, and the exchanges
are changing their rules. No one who sits on an audit
committee will be the same after Enron.'' Mr. Gramm's wife,
Wendy, a onetime government regulator who serve on Enron's
audit committee, resigned from the company's board last week.
Representative Billy Tauzin, the Louisiana Republican who
held hearings on Enron's collapse, agreed with Mr. Gramm's
appraisal, but he said it will still vital for Congress to
act, even though the prospects for legislation are not
strong.
``It's all very iffy,'' he said. ``There is a huge rift
between where the Senate believes these issues ought to go
and what the House has already passed. I don't know if it
gets worked out in time.''
Both Democrats and Republicans have already begun to
consider strategies to make the best political use of the
issue in the November elections. The Republicans are relying
heavily on the rule-making and enforcement actions of the
S.E.C.
On the Democratic side, one idea under discussion by
advisers to Senator Daschle is to bundle disparate proposals
into one package, making it more efficient to both confront
recalcitrant Republicans in the House and make a polticial
issue in the fall of the legislation's defeat.
In any event, politicians and lobbyists say that any change
in the accounting treatment of stock options is dead for the
year--largely because of the perception that Silicon Valley,
where such options are as ubiquitous as the Internet
itself, is up for grabs in the 2002 and 2004 elections.
Proposals have been made to force companies to account for
options as a compensation cost--now they are not charged
against corporate earnings--and to limit the ability of
companies to take tax deductions for issuing options. But
technology companies, financial firms and corporate trade
groups--with the backing of President Bush--have lobbied
lawmakers around the country to maintain the current system.
For now, lawmakers say, they have trumped the arguments of
such people as Alan Greenspan, the Federal Reserve chairman,
and the multibillionaire investor Warren E. Buffett that the
current treatment of options contributed to corporate
overreaching in the 1990's.
The Bush administration has not been a visible force in the
legislative battles, relying instead on likeminded allies--
notably Senator Gramm--to bottle up the most ambitious
legislation. He has met repeatedly with corporate lobbyists
and urged them to press sympathetic Democrats or those facing
tight races, like Thomas R. Carper of Delaware, Evan Bayh of
Indiana and Zell Miller of Georgia, to block legislation from
reaching the Senate floor.
Democrats say that effort appears to have failed and that
Senator Paul S. Sarbanes, Democrat of Maryland, appears to
have the support to get a bill approved by the banking
committee. It would sharply curtail the consulting work
performed by accounting firms, create a relatively
independent oversight board for the accounting profession,
require large corporations to rotate their auditors every
five years, and impose tighter conflict of interest
restrictions on stock analysts than the measure that was
passed by the House.
Mr. Gramm has been working closely with the administration
on an alternative measure that does not tighten conflict of
interest regulations for analysts or auditing firms. His
wife's Enron ties seem to have produced no political pressure
on Mr. Gramm--who has announced his intention to retire from
the Senate after this year--to shy from the debate.
The post-Enron proposals prompted scores of industry
associations and hundreds of corporations to retain lobbyists
and use their own employees to try to weaken or kill the
measures. They include the American Institute of Certified
Public Accountants, which is dominated by the largest firms.
Hundreds of companies, including Oracle and Intel, have
fought against changing the treatment of stock options. And
many of the largest Wall Street firms have lobbied against
changes in the laws governing stock analysts.
The drift in Congress largely reflects the power of the
accounting profession. Accounting firms ranked as three of
President Bush's top eight campaign donors in 2000, and over
all, the industry made $14.7 million in campaign donations to
both Democrats and Republicans during the last election
cycle, according to the Center for Responsive Politics. The
profession has influential members in many congressional
districts and has been known to use lawmakers' own
accountants to lobby them.
Pension legislation may stand a better chance in Congress,
although its prospects remain cloudy.
The chairman of the Senate Finance Committee, Max Baucus of
Montana, is crafting an alternative to a bill by Senator
Edward M. Kennedy, Democrat of Massachusetts, that drew
strong opposition from business lobbyists and Republicans.
On some points, Mr. Baucus's bill is likely to contain
provisions similar to those in the House bill, like
permitting workers to sell company stock awarded as a 401(k)
match three years after they receive it. Senate aides say the
bill may also place limits on certain forms of executive
compensation. Mr. Daschle is warming to the provisions that
are expected to form the Baucus proposal, Senate aides say.
But they say the Baucus plan is unlikely to include the
Kennedy proposal's provision prohibiting most companies from
both offering their stock as a 401(k) investment option and
using it to match employee contributions. This was designed
to keep employees from putting too much retirement money in
their own stock, as happened at Enron.
One major issue that remains unresolved is how to give
employees better access to investment advice. Investment
management companies have been lobbying to permit firms that
administer retirement plans to offer advice to participants.
Among other things, they would be permitted to recommend
investments for which they could receive a fee.
Senate aides say the Baucus proposal may instead contain a
provision encouraging employers to hire independent firms to
provide advice.
Exhibit 2
[From Business Week]
Accounting: Stronger Reforms, Please
Perhaps the only benefit of a major scandal is that it
creates pressure for reforms. Politicians who would otherwise
listen to special interests are forced by public pressure to
make long-needed changes. Often, the
[[Page S5266]]
legislative and regulatory changes that follow a scandal can
help build a strong foundation for economic growth.
If you hoped that the Enron/Anderson scandal would provide
an opportunity for just those sort of farsighted regulatory
improvements, start worrying. There are signs that the Bush
Administration, under pressure from the accounting lobby and
business groups such as the U.S. Chamber of Commerce, is
willing to support only mild changes in the current system.
And there's a danger that Congress will acquiesce. The House
of Representatives has already passed a very watered-down
bill.
That's wrong. Halfhearted reform is bad for the public, bad
for economy, and even bad for the accounting industry, which
needs to reestablish its credibility. Instead, we think the
best for strong accounting and financial reform is the
legislation proposed by Senator Paul S. Sarbanes (D-Md.),
chairman of the Senate Banking Committee.
Sarbanes' draft legislation--which is opposed by Senator
Phil Gramm (R-Tex.), the ranking GOP member of the Banking
Committee, and the Bush Administration--would set up a strong
private-sector board to oversee public-company accounting. It
would severely limit consulting services that accounting
firms can offer the companies they audit. And, not the least,
the bill would require CEOs and CFOs to sign their company's
audit reports and forfeit a year's worth of bonuses,
incentive-based pay, and profits on stock sales if the
company has to materially restate its earnings. That would
reduce the aggravating sight of CEOs claiming they had no
idea what kind of wrongdoing their company was engaged in.
Equally important, the Sarbanes bill would authorize more
money for the Securities & Exchange Commission and permit the
agency to hire at least twice as many professionals as the
Bush Administration is willing to fund. These additional
resources are essential for the SEC to do its regulatory
duty. According to a report from the General Accounting
Office, the SEC's workload increased by 80% in the 1990s, but
its staffing rose only 20%. In 2001, for example, the SEC
reviewed only 16% of all annual reports--way below the
desirable level.
No business or profession likes closer oversight. But
finding the right balance between markets and regulation is
essential for a well-functioning economy. Reform is never
easy--but history suggest that it's essential.
Exhibit 3
[From Business Week, June 3, 2002]
A Three-Point Plan for SEC Reform
(By Robert Barker)
A specter is haunting Wall Street--the specter of Main
Street retreating from investments and toward savings, going
from stocks to CDs. That's why, as the late, lamented bull
market nears its 20th anniversary this summer, ``we are on
the verge of the greatest overhaul of securities regulation
since the SEC was created,'' Securities & Exchange Commission
Chairman Harvey Pitt said recently. ``Nothing is off the
table.''
Pitt was addressing an Investor Summit that the called on
May 10 in Washington to air investors' concerns and answer
questions. I listened, via the Web, to more than three hours
of talk, most of it pertinent (box). Yet some specific
investor demands need amplification. Here's a short list of
concrete fixes. If Wall Street and its regulators can't deal
with this simple stuff, their reform effort will have failed:
FASTER. A CEO today can dump a ton of his company's stock
on the first day of the month and need not report it until
the 10th day of the next month. Not only should that
disclosure be made much sooner--within a day or two of the
sale, as now is being discussed--but such insider trades
should be disclosed for free via the SEC's Web site, which is
not the case today.
Quarterly and annual corporate reports, now required 45 and
90 days, respectively, after each period, will likely be
accelerated to 30 and 60 days. That's good, but faster filing
should not end there. Mutual-fund holdings should be
disclosed at least quarterly instead of every six months, the
current rule. Opponents say faster disclosure will make it
harder for funds to trade without tipping their hand and
ultimately hurting investors. But companies that manage $100
million or more--including most fund advisory firms--already
must disclose portfolio holdings 45 days after the close of
each quarter. Cut that to 30 days, tops. Short positions, now
exempt should be required as well as longs.
FAIRER. The SEC's regulation FD, or Fair Disclosure, seems
to have helped put individual investors on a more equal
footing with professionals when companies disclose
potentially market-moving information. Before its adoption in
August, 2000, the public routinely was barred from
management's conferencecalls with stock analysts. Not so now.
There remains, however, a forbidden zone--the ``road shows''
put on for institutional investors by companies preparing to
sell securities, particularly initial public offerings of
stock. Just as the SEC was able to invite the public via the
Internet to its own recent Investor Summit, investors small
as well as large should be asked to attend and pose questions
at these pre-IPO presentations. It's one thing to read a
prospectus laden with legalese; it's better to hear how
management discusses what's in the prospectus.
PLAINER. Speaking of legalese, regulators have long
encouraged the use of ``plain English'' in securities filing.
A charitable assessment of this initiative would be to say it
has achieved limited success. To any who doubt this, I point
to the 749-page proxy statement (including Annexes A through
N) filed recently by AT&T. If you own AT&T, you're supposed
to use this to decide how you'll vote by July 10 on the
company's plan to restructure and merge its cable unit with
Comcast. Meanwhile, regulators--while trying to make investor
communications clear to more than just the securities bar--
might also try setting a good example. In SEC lingo, the AT&T
proxy is a ``DEFM14A.'' A mutual fund's annual report is an
``N-SAR.'' A tender offer may be a ``13E-4'' or a ``14D-1.''
Our government can do much better.
Only a fool would expect Washington to solve every problem
in today's stock market. As SEC Commissioner Isaac Hunt put
it: ``The burden rests with individual investors to research
the information and make intelligent investment decisions on
their own.'' Fair enough. At the same time, investors don't
have to buy what Wall Street is selling. So the burden is
equally on Wall Street to show honestly that what it's
offering is worth buying. Otherwise, I'd say the intelligent
investment decision is a bank CD.
The PRESIDING OFFICER. The Senator from Hawaii is recognized.
Mr. AKAKA. Mr. President, I ask unanimous consent to speak in morning
business for 10 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________