[Congressional Record Volume 148, Number 87 (Wednesday, June 26, 2002)]
[Senate]
[Pages S6121-S6122]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        CORPORATE RESPONSIBILITY

  Mr. DURBIN. Mr. President, this morning's Wall Street Journal, on the 
front page, alerts us that WorldCom admits a $3.8 billion error in its 
accounting. ``The Firm Ousts Financial Chief and Struggles for 
Survival; SEC Probe Likely to Widen.''
  As I come to the floor of the Senate this afternoon, the news from 
the stock market is not encouraging. But it hasn't been encouraging for 
a long period of time. At least since the Enron scandal we have been 
dealing not just with recession but with what we must term a crisis in 
corporate responsibility.
  It is hard to imagine the ultimate impact this will have on average 
Americans and their families, let alone other businesses. But it really 
calls into question the responsibility and role of the Federal 
Government to respond to this crisis in corporate responsibility.
  Very soon, we will be considering legislation reported from the 
Banking Committee that will seek to address some of the most glaring 
problems in corporate governance in America today. It is talking about 
the role of accounting firms that are serving both as consultants and 
auditors--in a dual and sometimes conflicting capacity--that will 
establish standards for regulation of accounting firms so there is more 
credibility in their findings for the American public. It will address 
a number of other areas, such as strengthening the SEC. I believe all 
of these things are long overdue.
  When we return from the Fourth of July recess, the Senate will be 
addressing this issue. There will be differences of opinion. There will 
be some who will come to the floor and you will hear the debate. Some 
will argue to leave business alone, Government should not meddle. Yet 
the fact is that unless Government steps in in this situation offering 
sound advice, counsel, and regulation, we are going to continue to see 
this crisis in America's confidence in corporate institutions. There 
was a day when the robber barons ruled in America. Corporations, 
frankly, cared little or nothing about public opinion. The richest 
people in America were very powerful here on Capitol Hill. Those days 
hearken back to the era of Teddy Roosevelt, a Republican who came in 
and said: We are going to have an antitrust law and we are going to 
establish the agencies that we need to make certain business is 
regulated.
  About 35 years later, along came a relative, Franklin Roosevelt, 
facing a recession which led to a depression, which again called into 
question whether Government was doing enough to regulate business. His 
decision to create the SEC and other key agencies restored confidence 
in American business.

[[Page S6122]]

  I am afraid this year, in this new century, we face a similar 
challenge. If Congress shirks its responsibility, if the administration 
does not accept its responsibility, we will continue to see a decline 
not only in the stock market but in the savings, the pensions, the nest 
eggs of American families across the board.
  We really call on the leaders in the business community to step 
forward--and there are many honorable, hard-working people who have 
done such a fine job in creating good business, good enterprises, 
opportunities for people to work and profits to be made. They need to 
step forward and make it clear that the good people in the business 
sector will not tolerate what we are reading day in and day out in the 
Wall Street Journal about corporate activity.

  Recently, we had a hearing before the Governmental Affairs Committee 
and brought in some of the people from Enron who made the decisions. 
One of them a person I have admired for many years, who is a medical 
doctor in the Houston area, was head of the compensation committee for 
Enron. We asked him during the course of the hearing: How in the world 
could you justify hundreds of millions of dollars to individual 
corporate officials at Enron at a time when the company was clearly 
misleading the public?
  He said: We had to do it. We were the seventh largest corporation in 
America and we had to have the seventh highest salary in America for a 
CEO.
  It turned out the performance of the corporate officers really wasn't 
the important issue here; the question was, within that click, that 
fraternity, whether they were being compensated as their peers would 
expect.
  What happened to the old days when an entrepreneur not only engaged 
in risk but accepted the consequences when it didn't work out? You 
don't see that these days. People are being compensated hundreds of 
millions of dollars in stock options and, with that compensation, we 
look at the corporate records and find companies are losing money.
  The board of directors seems oblivious to the obvious. the People 
leading these corporations are not doing a good job managing. They are 
not creating the profitability for shareholders, and they are being 
rewarded with outrageous sums for salaries and stock options.
  My colleague, Senator Levin of Michigan, who is not in the Chamber, 
has been a leader in the whole question of stock options and the impact 
these options have on corporate America. They create incentives for 
greed, incentives for falsification in terms of companies' 
profitability. Time and again, we have seen that these incentives have 
led to a disastrous outcome, such as the situation with WorldCom.
  We are also seeing a gross disparity between the amount of money 
being paid to the average American working for a company and the 
compensation for officials at the highest levels. It is the greatest 
disparity in the history of our country. Truly, the rich are getting 
richer, the middle class is struggling, and the poor are getting 
poorer.
  Kevin Phillips, who has written a book called ``Wealth and 
Democracy'' analyzes the disparity of wealth and income in America. 
Now, it is understood in this country that if you are willing to take a 
risk and work hard, you should be compensated. That is one of the great 
parts of America, part of the American dream. But we see at WorldCom 
and other corporations where they are falsifying their profitability, 
where the average person, whether buying a mutual fund or a share of 
this stock, could not have a clue as to the reality and honesty of the 
corporate books.
  I say to President Bush and members of the administration: You cannot 
ignore this problem. This is a problem that calls for Presidential 
leadership and congressional leadership on both sides of the aisle. 
Those who want to take a hands-off, laissez-faire attitude toward this 
business crisis are inviting, unfortunately, even worse results in 
terms of our economy and our stock market.
  There is a standing joke, I guess, some comedians talk about: My 
401(k) has now become a 201(k).
  I guess we can laugh a little about that, but the fact is many people 
I meet in my home State of Illinois talk about postponing retirement. 
They have to keep working because what they had hoped to rely on just 
isn't going to be there. Today, at end of the day, when we look at Dow 
Jones, and NASDAQ, and other reports from financial communities, I am 
afraid we are seeing that even more wealth in America has evaporated.
  It is not because of this one corporation, WorldCom; it is because of 
this looming crisis in corporate responsibility, which is a specter 
over the economy of our Nation.
  This calls on us to be honest and real in our dealings with corporate 
America. It is not just a matter of their reporting accurately as to 
whether they are profitable or losing money; it is a question of 
corporate conduct. We have to demand corporate responsibility when it 
comes to treating pensioners from their companies fairly. If a promise 
is made to someone that they will have health insurance and a pension, 
that corporation should not be allowed to escape that responsibility or 
that liability--to leave these poor people alone, after promises of a 
lifetime, and unprotected and unguarded with the perils of the economy 
literally at their door.
  Secondly, we have to insist that corporations, when it comes to their 
conduct involving world trade, do the responsible thing for America. 
When Stanley Tools recently announced they were going to move their 
corporate operations to Bermuda to avoid American income taxes, this 
consumer said I will never buy another one of their products because, 
as far as I am concerned, if they can go to that Bermuda Triangle where 
their tax liability and American jobs disappear, they may as well 
disappear, too, as far as I am concerned.
  That is the kind of corporate misconduct that has become rampant and 
is creating a cynicism among Americans about many corporate leaders, 
and that has to change.
  In addition, when it comes to the whole question of the environment, 
time and time again, we find corporations that have created a toxic 
impact on the environment--those that have left behind toxic waste, for 
example, that are trying to escape liability.
  It is an issue being debated over Superfund sites. A Superfund site 
is a place in America where a corporation has done business and left 
behind dangerous toxic waste. The question is, Who should pay to clean 
it up? I think the answer is simple. The polluters should pay it; the 
person who makes the mess should pay it. That is not what we are 
hearing from this administration. We are hearing: No, no, you cannot 
ask the businesses and corporate community to be responsible for their 
misconduct; the taxpayers in general should pay for the cleanup.
  That is wrong, just plain wrong. That is not fair and it is not just.
  This issue of corporate responsibility is rising as the Dow Jones 
falls. People across America are understanding that the great 
corporations and the great businesses that are truly the backbone and 
strength of our economy have to stand up and be responsible in their 
conduct.
  As I said earlier, there are good ones. I know many great business 
leaders. In my State of Illinois and the city of Chicago, I can list 
dozens of them for you. But there are some who are bringing shame on 
this sector of the economy and the people who are dedicated to American 
business.
  I hope this WorldCom scandal which has been announced this morning in 
the Wall Street Journal is a wake-up call not only for the President 
but for Congress as well.
  I yield the floor.

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