Bush urges responsibility

WASHINGTON -- President Bush, demanding corporate responsibility amid the Enron bankruptcy scandal, said Thursday the federal government should strip company chief executives of ill-gotten bonuses and create an agency to monitor the accounting industry. \n"A good business always respects the boundaries of right and wrong," he told business executives. \nBush is pressuring companies to be more forthright with investors, and for auditors to play fair in their assessments, following the Enron bankruptcy, which threatened to inflict political damage on the White House. The Houston-based energy-trading company, which has been Bush's most generous corporate political backer, hid more than $1 billion in debt and its auditors endorsed its financial statements. \nMany investors have been unnerved by Enron's collapse and distrustful of the accuracy of the financial reports of big companies in general, contributing to a volatile stock market. \nWith Congress considering legislative action of its own, Bush released a 10-point plan that bundled various proposals made recently by the head of the Securities and Exchange Commission and by lawmakers. \n"The whole design of free-market capitalism depends upon free people acting responsibility," Bush said at an awards ceremony. "Business people must answer not just to the demands of the markets or self-interest, but to the demands of conscience." \nRep. John LaFalce of New York, senior Democrat on the House Financial Services Committee who has proposed legislation, said Bush's plan does not go far enough. \n"It falls far short of what is necessary," LaFalce said in a statement. "I would hope that the president would work with the Congress on a bipartisan basis to put real teeth into his proposal so we can guarantee substantive reform, not mere cosmetics." \nDemocratic Sens. Christopher Dodd of Connecticut and Jon Corzine of New Jersey put forward legislation Thursday that would, among other things, bar accounting firms from also performing significant consulting services for companies whose books they audit. \nOne of Bush's proposals would create an independent regulatory board under the supervision of the SEC to develop standards of professional conduct and competence. The board would monitor, investigate and enforce its "ethics principles" by punishing offenders. \nCongress, the SEC and the Justice Department are investigating Enron and the role of its longtime auditor, the Arthur Andersen LLP accounting firm, in Enron's collapse. The company entered the biggest corporate bankruptcy in U.S. history Dec. 2. \nBush did not mention the Enron or Andersen, but seemed to be speaking of the accounting firm when he mentioned auditing standards. "We've seen lately just how important these standards are and the harm that can follow when they are ignored," he said. \nSEC Chairman Harvey Pitt, who was appointed by Bush, has proposed a new private-sector body to regulate the accounting profession. It would be dominated by executives and experts from outside the accounting industry. \nBut some experts say a new federal regulatory agency should be created for the accounting profession, which is currently self-policing. \nUnder Bush's proposal, the government would bar external auditors from performing any other services such as consulting for the same corporate client if that other service compromises the independence of the audit. Andersen performed both auditing and consulting for Enron. \nBush also proposed that company chief executive officers would be forced to pay back bonuses and other "incentive-based" compensation in cases of accounting restatements stemming from misconduct. The White House didn't say who would investigate or enforce this provision. \nSome of Bush's proposals would require new laws; others could be simply implemented by the SEC. \nEnron executives got bonuses totaling some $320 million last year alone as rewards for hitting stock-price targets. The targets were reached at the same time investigators say Enron officials were improperly inflating company profits by hundreds of millions of dollars, thereby boosting share prices. \nThe company issued restatements that sliced nearly $600 million off its earnings. \nIt wasn't clear whether Bush's proposal could apply retroactively to Enron executives. \nBush also would force CEOs to personally vouch for the veracity of information in their financial statements. Top executives who abuse their power could be banned from any corporate leadership positions. \nMoreover, they would be forced to tell the public promptly when they sell or buy company stock for personal gain.