O’Neill Calls Scandals an ‘Outrage’
U.S. Treasury Secretary Paul H. O’Neill said people should be “outraged” by recent corporate scandals, as President Bush’s administration continues to seek a way to bolster investor confidence.
O’Neill, speaking on ABC’s “This Week” program, said Bush would sign legislation that revamps regulation of the accounting industry if passed by Congress. He also called for better disclosure of the cost of stock options and said corporate boards should show restraint on executive pay.
The administration has been emphasizing corporate responsibility in recent weeks as financial markets react to scandals that have enveloped corporations such as Enron Corp., Tyco International Ltd. and Adelphia Communications Corp. Last Thursday, Bush urged a group of executives to help eliminate an “overhang of mistrust” of public companies. O’Neill made a similar appeal two days earlier.
“I think anyone who’s paying attention ought to be outraged about the things that keep tumbling out,” O’Neill said in the ABC interview. “The amount of money some of these people have taken out and gotten away with is just unconscionable.”
Concerns about corporate accounting have helped push the Dow Jones industrial average down 7.7% this year and the S&P; 500 index down 14%.
O’Neill stopped short of saying whether Bush would sign a Democratic-backed bill in the Senate to create an independent accounting oversight board and impose new responsibilities on corporate officers and Wall Street analysts. The Republican-controlled House passed a competing version that gives an oversight board fewer powers.
Administration officials have praised a Securities and Exchange Commission proposal made last Thursday to create a Public Accountability Board to oversee the accounting industry. The SEC plan would be overtaken by any measure that passes both chambers of Congress.
On the question of whether accountants should be allowed to offer clients auditing and consulting services, O’Neill said he favors letting regulators decide rather than settling the matter in the law.
Accounting firm Arthur Andersen was convicted June 15 of obstructing a government investigation into Enron’s finances before the energy trader filed for Chapter 11 bankruptcy protection last year.
O’Neill, the former chairman of Alcoa Inc., said boards of directors should give closer scrutiny to how much their chief executives get paid.
“I think the corporate pay, especially the amount of money some of these people have ripped off when they’ve been abusing their trust, it’s an outrage,” the secretary said. He added that it’s not the government’s role to regulate CEO pay.
He also said investors deserve to know how much money is tied up in stock options granted to executives by accounting for the options as expenses on a company’s balance sheet.
That would make it “clear to every shareholder and every member of the public how much prospective money is attached to the granting of stock options,” O’Neill said.
Bush has stepped up his rhetoric on corporate responsibility as stock prices have faltered. Last week, he asked executives who are members of the Business Roundtable to tighten corporate governance in what executives described as an impassioned plea for leadership. During a stop in Florida, the president said business “must clean up its act” to restore faith in the markets.
