[Congressional Record Volume 165, Number 102 (Tuesday, June 18, 2019)]
[Senate]
[Page S3658]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. REED:
  S. 1885. 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 reintroducing the Corporate 
Management Accountability Act, which asks 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, William Dudley. then the President of the Federal Reserve 
Bank of New York, 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 2009, banks globally have paid $372 billion in penalties, 
according to the Boston Consulting Group. However, despite these fines, 
financial institutions continue to engage in unacceptable behavior, 
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, almost half the State may have been 
impacted by the cybersecurity breach at Equifax. These and other 
breaches and lapses illustrate how far financial institutions have to 
go in rebuilding the trust of Rhode Islanders and the American people.
  At the same time, it is evident that simply fining and penalizing 
financial institutions at the corporate level is not enough to deter 
bad actors. 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 the White 
Collar Watch column in the New York Times. ``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 reintroducing today 
is one attempt at helping to solve this problem. The bill simply 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 Americans 
for Financial Reform.
  I urge all my colleagues to join this legislative effort to hold 
senior executives accountable for their actions.

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