Rethinking reform

Now that corporate reform has been effectively been bumped off the legislative fast track by an urgency to make war with Iraq, the issue is in serious danger of getting watered down. Reform legislation still is being discussed and could pass yet during this Congressional session, but the proximity of Congressional elections, the misguided notion that investigations and lawsuits equal reform progress, as well as the ability of executives under fire to manipulate reform themselves, may all serve to create only half-baked legislation.

Following some initial corporate reforms passed this summer, including the requirement for chief executives to sign off on their public firms’ financial reports, it was thought that further, tougher, more in-depth legislation could be right around the corner. The Bush administration’s single-minded pursuit of war, however, has made corporate reform a secondary issue for Congress—ironically that means it could be more of a hot potato for Congress people trying to get re-elected this November, and those who serve constituencies that include big corporate towns may back off the issue entirely for now.

As Bush and his ilk hunt down Saddam and his ilk, the President is claiming that zest for corporate reform has not abated, his proof the ongoing state and federal investigations into various corporate fraud allegations, as well as lawsuits like the one filed this week by New York Attorney General Eliot Spitzer against telecom executives who made money off alleged insider stock sales. However, the corporate reform issue will not move forward on the strength of court cases--real rules are needed, rules forged at a national level. True corporate reform will do much more to win back the trust and investment dollars of Americans than an ongoing parade of CEOs into plush white collar prisons.

Finally, the delay in passing further corporate reform legislation gives some of those accused a better chance to influence the issue to their own benefit. The most recent example of this was Gary Winnick’s move yesterday pledging $25 million of his own money to help pay back pensioners who lost money in Global Crossing.

It sounds like Winnick wants to be a good Samaritan, and unfortunately, some members of the Senate subcommittee he was testifying before saw his pledge as exactly that. But Winnick is trying to save his skin by using the subcommittee proceedings as a public relations platform. His $25 million pledge does not come close to the billions investors lost during his involvement with Global Crossing, and it really does nothing to correct the abuses that have been made by executives in telecom and other industries.

Winnick called on other executives to follow his example, and do not be mistaken why--he may believe that he can buy his way out of trouble and into the mercy of legislators and investigators.

We need to show executives who were busy buying companies a few years ago that not everything has a price, especially corporate reform.

Contact Dan O'Shea at doshea@primediabusiness.com.