Bush Creates a Harder Challenge on Ethics After Easing Corporate Rules
It’s easy to imagine the frenzy that would be engulfing Washington if it were President Clinton now revising his explanation of a controversial 12-year-old stock deal.
Rush Limbaugh would be roaring in outrage. Robert H. Bork would be decrying the loss of moral authority in the Oval Office. Sen. Arlen Specter (R-Pa.) would be demanding a special prosecutor. Congressional committees would be subpoenaing the president’s old business partners.
President Bush probably will be spared all that, even after suddenly altering his explanation for why he was eight months late in reporting to the Securities and Exchange Commission his 1990 sale of stock in Harken Energy Corp.--a company on whose board he sat--shortly before it announced large losses. (For years he blamed it on the SEC; now he’s fingering Harken’s lawyers.)
After the fanatical ethics wars of the Clinton years, few in Washington have much stomach for a full-scale confrontation--though the Washington Post raised eyebrows by revealing Bush’s former personal attorney was the SEC general counsel at the time the commission cleared him of wrongdoing in the stock sale. (The attorney, James Doty, says he recused himself.) The demands of the real war underway against terrorism also will discourage a political firefight over the sale. But even so, the disclosures are still creating awkward moments for Bush as he prepares to call for greater corporate responsibility in a speech Tuesday in New York.
Actually, the focus on Bush’s behavior 12 years ago may frame the wrong debate. It’s likely that the dominant argument in Washington will be over whether it’s credible for Bush to demand better corporate behavior while facing these personal questions. The more relevant issue is whether it’s credible for Bush to threaten a crackdown now after his administration spent its first 18 months promising business kinder and gentler enforcement of the range of federal laws against corporate misconduct--from the environment to the stock markets to the workplace. In other words, can Bush plausibly shake the iron fist after stroking the Fortune 500 for so long with a velvet glove?
For all the nouvelle elements of Bush’s thinking on social issues such as education or homeownership, he’s always been a conventional conservative on government oversight of business. As governor of Texas, presidential candidate and president, Bush has focused more on intrusive government than irresponsible corporations. His consistent message has been that, in pursuing its goals and enforcing its laws, government should be more cooperative and less coercive. During the 2000 campaign, he crystallized his view on government’s relationship with business when he said: “I do not believe you can sue your way or regulate your way to clean air and clean water.”
Bush has put flesh on that philosophy by staffing many federal agencies with alumni of the industries they now regulate. The Interior Department is crowded with former lobbyists for the coal and oil industries. A former timber lobbyist is watching the national forests. Harvey L. Pitt, the SEC chairman, came from the accounting industry; Bush already has appointed another accounting industry alum to the five-member commission and nominated yet a third. (That means Bush is seeking to construct an SEC, for the first time, with a majority of commissioners tied to the accounting industry.)
To monitor safety in the workplace, Bush found an executive from the chemical industry; to monitor safety in the mines, he appointed an executive from the mining industry. The list goes on.
In chorus, Bush’s appointees have sung the same tune. At her confirmation hearing last year, Environmental Protection Agency Administrator Christie Whitman promised more negotiation and less litigation against recalcitrant companies. “Instilling fear does not solve problems,” she insisted. Over at the Occupational Safety and Health Administration, director John Henshaw as late as last month told a business audience: “Hopefully, we can put the days of OSHA as an adversary behind us.”
And before Enron and WorldCom and Martha Stewart forced the SEC chair to try to morph into Harvey Pitt-bull, he was sending the same message, telling the accounting industry last fall that he viewed them as the agency’s “partner” and pledging “a new era of respect and cooperation” after the confrontations of the Clinton years.
Partnership with industry has its place. But enforcing federal law to police the marketplace isn’t it. No cop anywhere would agree with Whitman; they instead would argue that the best way to discourage drug dealing or street crime is to instill fear--of relentless enforcement. The same is true in the boardroom. Polluters or stock swindlers are more likely to stop because they fear being caught than because Washington asks them nicely.
The tsunami of corporate scandals has made the chocolates-on-the-pillow approach to enforcement untenable at the SEC. But the velvet glove still dominates in other arenas that haven’t attracted as bright a spotlight. OSHA has asked employers only for voluntary steps to reduce repetitive stress injuries. Several top EPA lawyers have quit since Bush took office, bristling at budget cuts for enforcement and accusing the administration of undermining their pursuit of tough settlements against companies violating clean air and clean water laws.
And even in the securities field--while promising vigorous pursuit of individual wrongdoers--the White House still hasn’t endorsed the systematic changes in accounting oversight included in the reform bill Senate Democrats will bring to the floor this week.
It’s good for Bush to add his voice to the demand for more ethical corporate behavior. But his words would carry more weight if matched with action. If Bush is sincere about confronting corporate misbehavior, he’d be changing direction not only at the SEC but at the agencies protecting the environment, the workplace and public lands too. Eric Schaeffer, who resigned in protest as head of civil enforcement at the EPA earlier this year, asks the right question: Does it make sense to rely “on corporate self-policing” to safeguard the public “after what we’ve learned about corporate responsibility from Enron and others.”
Until Bush has an answer, his call for a corporate cleanup will remain muffled--as if he were speaking into a velvet glove.
Ronald Brownstein’s column appears every Monday. See current and past Brownstein columns on The Times’ Web site: www.latimes.com/brownstein.
