[Congressional Record Volume 163, Number 158 (Tuesday, October 3, 2017)]
[Senate]
[Page S6290]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED:
  S. 1912. A bill to ensure that irresponsible corporate executives, 
rather than shareholders, pay fines and penalties; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mr. REED. Mr. President, today, I am introducing the Corporate 
Management Accountability Act, which request each publicly traded 
company to disclose its policies on whether senior executives or 
shareholders bear the costs of paying the company's fines and 
penalties.
  In 2014, the President of the Federal Reserve Bank of New York, 
William Dudley, gave a speech on Enhancing Financial Stability by 
Improving Culture in the Financial Services Industry. In this speech, 
President Dudley said, ``in recent years, there have been ongoing 
occurrences of serious professional misbehavior, ethical lapses and 
compliance failures at financial institutions. This has resulted in a 
long list of large fines and penalties, and, to a lesser degree than I 
would have desired employee dismissals and punishment. . . . The 
pattern of bad behavior did not end with the financial crisis, but 
continued despite the considerable public sector intervention that was 
necessary to stabilize the financial system. As a consequence, the 
financial industry has largely lost the public trust.''
  Since 2008, ``banks globally have paid $321 billion in fines . . . 
for an abundance of regulatory failings from money laundering to market 
manipulation and terrorist financing, according to data from Boston 
Consulting Group.'' Unfortunately, despite these fines, we continue to 
see disappointing behavior at our financial institutions, whether it is 
Wells Fargo betraying the trust of its customers by opening 
unauthorized accounts or it is Equifax endangering millions of 
consumers by compromising critical personal information. Indeed, in my 
home State of Rhode Island, nearly half the State may have been 
affected by the cybersecurity breach at Equifax. Given these and other 
breaches and lapses, it is clear that many financial institutions have 
a long way to go in rebuilding the trust of Rhode Islanders and the 
American people.
  At the same time, it is also clear that more must be done than simply 
fining and penalizing financial institutions at the corporate level. 
Senior executives, many of whom are all too eager to take credit for a 
company's good news, must also take more responsibility for the bad 
news, especially if it is true that the buck stops with them. For 
example, the Financial Crisis Inquiry Commission concluded ``the 
financial crisis reached cataclysmic proportions with the collapse of 
Lehman Brothers,'' and yet, according to the Congressional Research 
Service, not a single senior executive officer at Lehman Brothers at 
the Federal level was charged, went to jail, or personally paid a 
Federal fine or penalty for the damage caused at Lehman Brothers that 
rippled through our economy in 2008.
  According to Professor Peter J. Henning, who also writes for the New 
York Times in its White Collar Watch column, ``a problem in holding 
individuals accountable for misconduct in an organization is the 
disconnect between the actual decisions and those charged with 
overseeing the company, so that executives and corporate boards usually 
plead ignorance about an issue until it is too late.''
  The Corporate Management Accountability Act I am introducing today is 
one attempt at helping to solve this problem. The bill asks publicly 
traded companies to disclose whether they expect senior executives or 
shareholders to pay the cost of corporate fines or penalties. This 
approach is supported by University of Minnesota Law School Professors 
Claire Hill and Richard Painter, who also served as President George W. 
Bush's chief ethics lawyer, as well as U.S. PIRG, Public Citizen, and 
Americans for Financial Reform.
  Companies must do a better job of aligning executive incentives so 
that they are motivated to put their shareholders, and not themselves, 
first. I urge all my colleagues to join this legislative effort to hold 
senior executives accountable for their actions.

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