Business Reform Hopes Dim

The brewing face-off with Iraq may have claimed its first casualty: more corporate reform legislation.

Prospects for a bevy of measures designed to strengthen protections for workers’ pensions and impose new rules of corporate behavior appear to be dimming, in part because of Washington’s preoccupation with President Bush’s aggressive new stance toward Iraqi President Saddam Hussein.

Corporate corruption remains a potent political issue. Bush on Thursday put the spotlight back on the issue, taking time from his initiative against Hussein to tout his efforts to root out corporate crime.

“We are making broad and dramatic progress against corporate fraud in America,” Bush said in a speech to federal prosecutors. He cited more than 100 investigations into suspected corporate fraud.

He also called on the Democrat-controlled Senate to pass a pension reform bill. “Right now, too many workers are locked into plans that force them to hold a large portion of their accounts in a company’s stock,” he said.

Congress passed a landmark accounting reform bill in late July in response to scandals at Enron Corp., WorldCom Inc. and other big companies. And as they broke for the summer, lawmakers promised to follow up with other measures, such as overhauling pension laws, cracking down on offshore tax havens, requiring companies to expense stock options and closing a loophole that allows dishonest executives to keep their multimillion-dollar mansions.

The measures have been stalled by shifting legislative priorities, such as the possibility of war, by aggressive lobbying by business to head off more regulation and by heightened election-year tensions.

The obstacles are looming larger as the November vote nears.

“For these kinds of bills to pass, serious compromises would have to be made,” said Patrick Bashman, a senior fellow at the libertarian Cato Institute think tank. “But compromise becomes a four-letter word in the partisanship-centered weeks prior to a tightly contested election.”

Bryan Jones, a political science professor at the University of Washington, said the Iraq issue has “completely displaced” corporate reform. “I doubt that anything else serious is going to get done,” he said.

Political analysts say the pressure on Congress to do more also has eased.

Larry Sabato, a University of Virginia political scientist, said lawmakers can point to their passage of the accounting reform bill “and claim to have done something this session about corporate irresponsibility.”

Some analysts say Congress still might complete work on the other major piece of legislation spurred by Enron’s collapse: new safeguards for workers’ 401(k) retirement accounts. Enron workers suffered huge losses when the company stock, which made up a large part of their retirement accounts, plummeted.

Said Robert Litan, director of economic studies for the Brookings Institution, a nonpartisan think tank: “This was the issue that most resonated with the average American, and I would think that few congressmen running for reelection would want to tell their constituents that they had not eased their fears about being unable to sell company stock in 401(k) plans.”

Senate Majority Leader Tom Daschle (D-S.D.) said Thursday he still hopes to bring a pension reform bill to the Senate floor before Congress adjourns in mid-October. “We’re not giving up,” he said.

The GOP-controlled House this year passed a bill that would give employees new rights to sell company stock and diversify investments in their 401(k) accounts.

But Democrats who control the Senate have said the House measure doesn’t go far enough.

Complicating the picture, Democrats disagree among themselves over what should be included in the legislation.

Sen. Edward M. Kennedy (D-Mass.) has pushed for provisions that would require employee representation on pension boards and limit companies to offering their own stock as a matching contribution or as an investment option, but not both.

Some of his Democratic colleagues oppose those provisions.

Sen. John McCain (R-Ariz.) said Thursday he remains determined to push a requirement for companies to account for stock options on their books, a proposal blocked from the accounting reform bill approved this year.

“If a pension bill comes up, you’ll see that amendment,” he vowed.

Also, any pension reform measure is likely to attract other initiatives, such as business tax breaks and an increase in the minimum wage--issues that would make it more difficult to pass a measure before Congress adjourns.

McCain acknowledged the uncertainty over whether a pension bill will clear Congress this year.

“We’re running out of time.”

Efforts to close a loophole that could allow executives of scandal-tainted companies to declare bankruptcy and keep their multimillion-dollar homes has been stymied by a dispute over an unrelated issue.

Sponsors of the measure to close the so-called homestead exemption promise to persevere, despite the ticking legislative clock.

“It would be a miscarriage of justice to permit the year to end without addressing the most scandalous abuse of the bankruptcy laws in an era when numerous corporate executives will surely use the homestead exemption to protect millions of dollars from their creditors,” said Sen. Herbert Kohl (D-Wis.).