[Weekly Compilation of Presidential Documents Volume 38, Number 10 (Monday, March 11, 2002)]
[Pages 370-372]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks at the Presentation of the Malcolm Baldrige National Quality 
Awards

March 7, 2002

    Thank you, Secretary Evans, and thank you all very much. It's an 
honor to be back here. It's a pleasure to see so many students here 
today. I understand some of you took a tour of the White House. You must 
have behaved well, because I didn't hear the dogs barking. [Laughter] I 
hope you enjoyed being there as much as Laura and I enjoy being there. 
It's a fabulous place, the White House is. I'm so glad you were able to 
see it.
    I'm also pleased to be back to congratulate the award winners of the 
Malcolm Baldrige National Quality Award. I'm really pleased that school 
districts have been added. I want to commend the Baldrige Committee for 
including education. Secretary Rod Paige is here. Both of us believe so 
strongly that no child should be left behind. Both of us know the 
potential of the public school systems in America, and we want to thank 
and congratulate the school districts here that have set the highest of 
high standards not only at the secondary level but also at the high 
level of education.
    I was privileged to know Malcolm Baldrige. He was one of America's 
most distinguished Secretaries of Commerce, and what a fine and 
honorable man he was. The award that bears his name reflects the virtues 
that he brought to public service and how he lived in his private life, 
a commitment to excellence, shrewd judgment and sound judgment, 
principled leadership, integrity, and a sense of responsibility.
    Today's honorees have met a rigorous test, and such a worthy example 
for others. And I know Malcolm would have approved of the winners.
    It's a great honor to be with Midge Baldrige again--you're looking 
pretty darn good these days--[laughter]--and Letitia Baldrige as well. I 
know we've got some Members of the United States Congress here. I think 
Bill Jenkins from Tennessee is here. I know Connie Morella is here. 
Thank you for coming, Connie. I also appreciate Nancy Murkowski, the 
wife of Frank Murkowski. Nancy is committed to quality education in the 
State of Alaska, and I know you're as proud as I am for the winners who 
are here. And I always want to thank the U.S. Army Band for providing 
such wonderful music.
    I appreciate the fact that prior winners of the Baldrige Award are 
here. I think it's important for you to stay involved in the process. As 
you heard, some of the recipients also appreciate of you being here. And 
I want to welcome five more organizations to your ranks, the school 
districts, the University of Wisconsin-Stout, as well as the fine 
symbols of entrepreneurial spirit in America, Pal's Sudden Service of 
Tennessee, and of course, Clarke American Checks, represented by some 
rowdy Texans.
    This is a high, high honor. I know you all understand what a big 
deal this is, having gone through the process. It is an important award, 
and I congratulate you all so very much. The award goes to organizations 
rather than any single individual, and that's important to note. As 
we've seen today, success happens in an atmosphere of teamwork, common 
values, and trust.
    An organization needs a good idea and a good product or a good 
service. It certainly needs a good strategic plan. But more than 
anything, it needs good people, men and women of integrity who 
understand their duties to each other and to the public interest.
    And this is true throughout our entire economy. The free enterprise 
system draws upon the best in people, creativity, ingenuity, energy, a 
desire to make life better for ourselves and for others. The whole 
design of

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free market capitalism depends upon free people acting responsibly. 
Business people must answer not just to the demands of the market or 
self-interest but to the demands of conscience.
    The bottom line of the balance sheet defines a business' goal but 
not the sum of responsibilities of its leaders. Management should 
respect workers. A firm should be loyal to the community, mindful of the 
environment.
    In America, by far--by far--most businesses fulfill their 
responsibilities. They do not cut ethical corners or neglect workers or 
disregard community standards. A good business finds opportunities and 
makes the most of them, and a good business always respects the 
boundaries of right and wrong.
    In our country, the law defines many of these responsibilities, from 
workplace safety to environmental protection. For publicly held 
corporations the law goes further, defining standards of disclosure with 
independent certification by auditing firms.
    We have seen lately just how important these standards are and the 
harm that can follow when they are ignored. Exactly where the blame lies 
may take a long time to determine, and legal judgments are for 
regulators and for courts. But this much is clear: To properly inform 
shareholders and the investing public, we must adopt better standards of 
disclosure and accounting practices for all of corporate America.
    The reason that a single bankruptcy can cause so much concern in 
America is that more Americans than ever have invested their money in 
public corporations. Today, about 80 million Americans own stock, either 
individually or through their pension plans. This is one of the causes 
for the expansion in personal wealth over the past 20 years. This has 
been an incredibly positive development for America. Stock ownership 
allows citizens from all walks of life to own a part of the economy and 
to share in its growth. The people who run public companies owe a 
special obligation to these investors, many of whom have put their 
savings and future security on the line.
    Corporate officers must perform their duty in good faith to the best 
of their abilities. They must disclose relevant facts to the investing 
public, and they must focus on the interests of shareholders, who are 
the real owners of any publicly held enterprise.
    I recognize that the basic rules of corporate law are made by the 
States, and that's as it should be. But Washington has responsibilities 
as well. The buying and selling of publicly held shares is regulated by 
the Federal Government. And today I call upon the Securities and 
Exchange Commission to take action. Existing regulations should be 
clearer. Penalties for wrongdoing should be tougher. Reform should 
improve investor confidence and help our economy to flourish and grow.
    It is important to provide sound regulation and remedies where 
needed, without inviting a rush of new lawsuits that exploit problems 
instead of solving them. Our goal is better rules so that conflict, 
suspicion, and broken faith can be avoided in the first place.
    Reform should begin with accountability, and reform should start at 
the top. The chief executive officer has a daily duty to oversee the 
entire enterprise, the entire firm, and therefore, bears a unique 
responsibility for serving shareholder interests. Currently, a CEO signs 
a nominal certification of annual financial statements and does so 
merely in his capacity on behalf of the company. In the future, the 
CEO's signature should also be his personal certification, vouching for 
the veracity and fairness of the financial disclosures. When he signs a 
statement, he's giving his word and should stand behind it.
    Oftentimes businesses base executive bonuses on financial 
statements. If, however, a financial statement turns out to be grossly 
inaccurate or the result of serious misconduct, those bonuses should be 
returned to the company's treasury on behalf of it's shareholders.
    Corporate officers should not be allowed to secretly trade their 
company's stock. Every time they buy or sell, they should be required to 
tell the public within 2 days. The Securities and Exchange Commission 
should be able to punish corporate leaders who clearly abuse their 
powers, by banning them from ever serving again as officers or directors 
of publicly held corporations.
    We must also do more to safeguard the rights of investors. America 
has the best system of corporate disclosure. Yet, the interests

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of the average investor are sometimes overlooked, especially the need 
for thorough and timely information about firm performance. And some 
corporations have used artful and intricate financial arrangements to 
hide the true risks of the investment.
    We need to get back to basic capitalism. In a system based on the 
willingness to take risks, investors need to know the true nature of the 
risks. The investor has the right to a true and fair picture of assets, 
liabilities, and income. Management has a good-faith obligation to 
provide that information, attracting investment by building on 
strengths, not by clever concealment of weaknesses.
    And to further ensure that information is reliable, we will need 
reforms within the accounting profession. Auditors are a critical 
external check on management, and we must ensure that the integrity of 
their work is never compromised. Accounting is one of the most basic and 
one of the most respected professions in our country, and it can help 
protect its own integrity by developing and enforcing clearer standards 
of conduct.
    The profession also needs an independent regulatory board to hold 
accounting firms to the highest ethical standards. And the SEC should 
exercise more effective and broad oversight of accounting standards. The 
SEC should also do more to guard against conflicts of interest, 
requiring, for example, that an external auditor not be permitted to 
provide internal audits to the same client.
    And finally, auditors should do more than evaluate a company by 
minimum standards. Instead, the auditors should compare the company's 
financial controls to the best industry practices and give those 
findings to the audit committee.
    You know, we're passing through extraordinary times here in America. 
We fight a war--a real war--to protect our homeland by bringing 
terrorists to justice. We stand strong against evil abroad--I mean, we 
are standing strong and determined and united against evil. We're 
finding strength at home through the gathering momentum of millions of 
acts of kindness and generosity and goodness, neighbors helping 
neighbors, Americans adhering to the age-old call to love someone just 
like you'd like to be loved yourself.
    America is ushering in a responsibility era, a culture regaining a 
sense of personal responsibility, where each of us understands we're 
responsible for the decisions we make in life. And this new culture must 
include a renewed sense of corporate responsibility. If you lead a 
corporation, you have a responsibility to serve your shareholders, to be 
honest with your employees. You have a responsibility to obey the law 
and to tell the truth.
    Business relationships, like all human relationships, are built on a 
foundation of integrity and trust. When those values are practiced and 
expected, our economy and our country are stronger.
    We're seeing some challenges and some changes in American business 
and American enterprise. Yet this annual presentation is a reminder of 
things that must never change, the passion for excellence, the drive to 
innovate, the hard work that goes with any successful enterprise, the 
need to be open, the call for integrity. This year's Baldrige Award 
winners have shown these qualities and have taken their place in a 
distinguished line of leaders.
    Once again, my congratulations to you all. May God bless your 
enterprises, and may God bless America.

 Note: The President spoke at 11:05 a.m. in the International Ballroom 
Center at the Washington Hilton Hotel. In his remarks, he referred to 
Margaret ``Midge'' Baldrige, widow of former Secretary of Commerce 
Malcolm Baldrige; and Letitia Baldrige, his sister.