The Cabinet Room
The White House
June 29, 2002
Good morning. This week, we learned of another deeply troubling accounting scandal
at a major American corporation. Reports allege that the company hid nearly
$4 billion in expenses, and reported profits when it may have actually lost
more than a billion dollars. The Securities and Exchange Commission immediately
filed suit against the company to preserve documents, so that a complete and
thorough investigation can take place, and to ensure that the company cannot
give massive payments to executives during the investigation.
Despite recent abuses of the public's trust, our economy remains fundamentally
sound and strong, and the vast majority of businesspeople are living by the
rules. Yet, confidence is the cornerstone of our economic system, so a few bad
actors can tarnish our entire free enterprise system. We must have rules and
laws that restore faith in the integrity of American business. The government
will fully investigate reports of corporate fraud, and hold the guilty parties
accountable for misleading shareholders and employees. Executives who commit
fraud will face financial penalties, and, when they are guilty of criminal wrongdoing,
they will face jail time.
In March, I unveiled a ten-point plan designed to enhance the economic security
of Americans by providing better information to investors, making corporate
officers more accountable, and delivering a stronger, more independent auditing
system. Among other measures, the plan would give the Securities and Exchange
Commission two critical tools to hold corporate officers accountable.
First, corporate officers who personally benefit from false accounting statements
should lose all the money gained by their fraud. An executive whose salary or
bonus is tied to his company's performance makes more money when the company
has done well. That is fair when all of the accounting is done above board.
Yet, when bad accounting practices make the company appear to be more successful
than it actually is, corporate executives should lose their phony profits gained
at the expense of employees and stockholders.
Second, corporate leaders who violate the public's trust should never be given
that trust again. 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.
Since my call for action, the Securities and Exchange Commission has sought
to take away the profits of senior executives from four different companies,
and in this year the SEC has sought to bar 54 officers and directors. On Thursday,
the SEC ordered the CEOs and CFOs of the 1,000 largest public companies to certify
that the financial information they submitted in the last year was fair and
In addition to bringing a new measure of accountability to American businesses,
my administration is committed to protecting the retirement savings of American
workers. The plan I unveiled in February would give workers greater freedom
to diversify and manage their own retirement funds. It would ensure that corporate
executives are held to the same restrictions as workers during blackout periods,
when employees are prohibited from trading in their accounts. It would give
workers quarterly information about their investments. And it would expand workers'
access to investment advice. These measures should give American workers confidence
that their investments will not fall prey to unethical executives.
America is ushering in a new era of responsibility, and that ethic of responsibility
must extend to America's boardrooms. I want every American to know that the
vast majority of businesspeople are honest individuals who do right by the employees
and their shareholders. The unethical actions of a few should not be allowed
to call into question our whole free enterprise system.
No violation of the public's trust will be tolerated. The federal government
will be vigilant in prosecuting wrongdoers to ensure that investors and workers
maintain the highest confidence in American business.