Transcript of Bush speech
By Federal News Service
Last Update: 12:36 PM ET Jul 9, 2002
NEW YORK (Federal News Service) - The following is the transcript of remarks delivered Tuesday by President George W. Bush on corporate responsibility to the Association for a Better New York.
"Thank you very much for that warm welcome. I'm pleased to be
back in New York City. New York City is a unique symbol of
America's creativity and character and resilience. In the last 10
months, New Yorkers have shown a watching world the true spirit
of your city -- a spirit that honors the lost, remembers its heroes,
and goes forward with determination and with confidence.
The people of this city are writing one of the greatest chapters in
our nation's history. And all Americans are proud of New York.
I've come to the financial capital of the world to speak of a serious
challenge to our financial markets and to the confidence on which
they rest. The misdeeds now being uncovered in some quarters
of corporate America are threatening the financial well-being of
many workers and many investors. At this moment, America's
greatest economic need is higher ethical standards, standards
enforced by strict laws and upheld by responsible business
leaders. The lure of heady profits of the late 1990s spawned
abuses and excesses. With strict enforcement and higher ethical
standards, we must usher in a new era of integrity in corporate
America.
I want to thank Bill for his introduction. There's nothing like being
recycled.
But thanks for having me, and I'm honored to meet your family and
Uncle Jack.
I appreciate very much Secretary O'Neill and Secretary Evans
traveling with me today. I want to thank the members of the New
York delegation, Senators Schumer and Clinton, as well as
Congressman Fossella and Congressman Rangel.
I appreciate so very much the mayor, my friend the mayor, for
being here to greet me as I came in on the chopper. Thank you,
Mr. Mayor, and thanks for the great job you're doing for New York.
I'm honored that Cardinal Egan is here. And I appreciate so very
much seeing John Whitehead, the chairman of the Lower
Manhattan Development Corporation. And thank you all for
coming as well.
The American economy, our economy, is built on confidence, the
conviction -- (off mike) -- our free enterprise system will continue
to be the most powerful and most promising in the world.
That confidence is well-placed. After all, American technology is
the most advanced in the world. Our universities attract the talent
of the world. Our workers and ranchers and farmers can compete
with anybody in the world. Our society rewards hard work and
honest ambition, bringing people to our shores from all around the
world who share those values. The American economy is the
most creative and enterprising and productive system ever
devised.
We can be confident because America's taking every necessary
step to fight and win the war on terror. We're reorganizing the
federal government to protect the homeland. We're hunting down
the terrorists who seek to sow chaos. My commitment and the
commitment of our government is total. We will not relent until the
cold-blooded killers are found, disrupted and defeated.
We can be confident because of the amazing achievements of
American workers and entrepreneurs. In spite of all that happened
last year, from the economic slowdown to the terrorist attack,
worker productivity has grown by 4.2 percent over the last four
quarters. In the first quarter of 2002, the economy grew at an
annual rate exceeding 6 percent. Though there's much work left to
do, American workers have defied the pessimists and laid the
foundation for a sustained recovery.
We can be confident because we're pursuing pro-growth reforms
in Washington, D.C. Last year we passed the biggest tax cut in a
generation, which encouraged job creation and boosted
consumer spending at just the right time. For the sake of
long-term growth, I'm asking Congress to make the tax reductions
permanent.
I'm asking Congress to join me to promote free trade, which will
open new markets and create better jobs and spur innovation. I
ask Congress to work with me to pass a terrorism insurance bill
to give companies the security they need to expand and to build.
And I will insist on, and if need be enforce, discipline in federal
spending so we can meet our national priorities without
undermining our economy.
We have much to be confident about in America, yet our economy
and our country need one more kind of confidence, confidence in
the character and conduct of all of our business leaders. The
American economy today is rising, while faith in the fundamental
integrity of American business leaders is being undermined.
Nearly every week brings better economic news and a discovery
of fraud and scandal.
Problems long in the making, but now coming to light.
We've learned of some business leaders obstructing justice and
misleading clients, falsifying records, business executives
breaching the trust and abusing power.
We've learned of CEOs earning tens of millions of dollars in
bonuses just before their companies go bankrupt, leaving
employees and retirees and investors to suffer. The business
pages of American newspapers should not read like a scandal
sheet.
The vast majority of businessmen and -women are honest. They
do right by their employees and their shareholders. They do not
cut ethical corners, and their work helps create an economy which
is the envy of the world.
Yet high-profile acts of deception have shaken people's trust. Too
many corporations seem disconnected from the values of our
country. These scandals have hurt the reputations of many good
and honest companies. They have hurt the stock market. And
worst of all, they are hurting millions of people who depend on the
integrity of businesses for their livelihood and their retirement, for
their peace of mind and their financial well-being.
When abuses like this begin to surface in the corporate world, it is
time to reaffirm the basic principles and rules that make
capitalism work: truthful books and honest people and
well-enforced laws against fraud and corruption.
All investment is an act of faith, and faith is earned by integrity. In
the long run, there is no capitalism without conscience; there is no
wealth without character.
And so again today, I'm calling for a new ethic or personal
responsibility in the business community, an ethic that will
increase investor confidence. It will make employees proud of
their companies and again regain the trust of the America people.
And our nation's most respected business leaders, including
many gathered here today, take this ethic very seriously. The
Business Roundtable, the New York Stock Exchange, the Nasdaq
have all proposed guidelines to improve corporate conduct and
transparency.
These include requirements that independent directors compose
a majority of the company's board; that all members of audit,
nominating and compensation committees be independent; and
that all stock option plans be approved by the shareholders. I call
on all the stock markets to adopt these sensible reforms, these
common sense reforms, as soon as possible.
Self-regulation is important, but it's not enough. Government
cannot remove risk from investment -- I know that -- or chance
from the market. But government can do more to promote
transparency and ensure that risks are honest.
And government can ensure that those who breach the trust of the
American people are punished.
Bold, well-considered reforms should demand integrity, without
stifling innovation and economic growth. From the antitrust laws of
the 19th century to the S&L reforms of recent times, America has
tackled financial problems when they appeared. The actions I'm
proposing follow in this tradition and should be welcomed by
every honest company in America.
First, we will use the full weight of the law to expose and root out
corruption. My administration will do everything in our power to
end the days of cooking the books and shading the truth and
breaking our laws. Today, by executive order, I create a new
corporate fraud task force, headed by the deputy attorney
general, which will target major accounting fraud and other
criminal activity in corporate finance. The task force will function
as a financial crimes SWAT team, overseeing the investigation of
corporate abusers and bringing them to account.
I'm also proposing tough new criminal penalties for corporate
fraud. This legislation would double the maximum prison terms for
those convicted of financial fraud from five to 10 years.
Defrauding investors is a serious offense, and the punishment
must be as serious as the crime.
I ask Congress to strengthen the ability of SEC investigators to
temporarily freeze improper payments to corporate executives
and to strengthen laws that prevent the destruction of corporate
documents in order to hide crimes.
Second, we're moving corporate accounting out of the shadows,
so the investing public will have a true and fair and timely picture
of assets and liabilities and income of publicly traded companies.
Greater transparency will expose bad companies and, just as
importantly, protect the reputations of the good ones. To expose
corporate corruption, I asked Congress four months ago for
funding to place 100 new enforcement personnel in the SEC. And
I call on Congress to act quickly on this request.
Today I announced my administration is asking Congress for an
additional $100 million in the coming year to give the SEC the
officers and the technology it needs to enforce the law. More
scandals are hiding in corporate America. We must find and
expose them now so we can begin rebuilding the confidence of
our people and the momentum of our markets.
I've also proposed a 10-point accountability plan for American
business designed to provide better information to shareholders,
set clear responsibility for corporate officers and develop a
stronger, more independent auditing system. This plan is ensuring
that the SEC takes aggressive and affirmative action. Corporate
officers who benefit from false accounting statements should
forfeit all money gained by their fraud. And executive whose
compensation is tied to his company's performance makes more
money when his company does well; that's fine. And that's fair
when the accounting is above-board. Yet when a company uses
deception -- deception accounting to hide reality, executives
should lose all their compensation -- all their compensation --
gained by the deceit.
Corporate leaders who violate the public trust should never be
given that trust again. The SEC should be able to punish
corporate leaders who are convicted of abusing their powers by
banning them from ever serving again as officers or directors of a
publicly held corporation. If an executive is guilty of outright fraud,
resignation is not enough. Only a ban on serving at the top of
another company will protect other shareholders and employees.
My accountability plan also requires CEOs to personally vouch for
their firm's annual financial statements. Currently, a CEO signs a
nominal certificate and does so merely on behalf of the company.
In the future, the signature of the CEO should also be his or her
personal certification of the veracity and fairness of the financial
disclosures. When you sign a statement, you're pledging your
word, and you should stand behind it.
And because the shareholders of America need confidence in
financial disclosures right away, the SEC has ordered the leaders
of nearly a thousand large public companies to certify that the
financial information they submitted in the last year was fair and it
was accurate. I've also called on the SEC to adopt new rules to
ensure that auditors will be independent and not compromised by
conflicts of interest.
The House of Representatives has passed needed legislation to
encourage transparency and accountability in American
businesses. The Senate also needs to act quickly and
responsibly so I can sign a good bill into law.
Third, my administration will guard the interests of the small
investor and pension holders. Most than 80 million Americans
own stock, and many of them are new to the market. Buying stock
gives them opportunity to build wealth over the long term. And this
is the very kind of responsible investment we must promote in
America.
To encourage stock ownership, we must make sure that analysts
give honest advice and pension plans treat workers fairly. Stock
analysts should be trusted advisers, not salesmen with a hidden
agenda. We must prevent analysts from touting weak companies
because they happen to be clients of their own firm for
underwriting or merger advice. This is a flat-out conflict of interest,
and we'll aggressively enforce new SEC rules against this
practice, rules which take effect today.
And the stock market should make sure that the advice analysts
give and the terms they use have real meaning to investors. "Buy"
should not be the only word in an analyst's vocabulary. And they
should never say "Hold" when they really mean "Sell." Small
investors should also not have to have the deck stacked against
them when it comes to managing their own retirement funds. My
pension reform proposal would treat corporate executives the
same as workers during so-called "black-out" periods, when
employees are prohibited from trading in their own accounts.
What's fair for the workers is fair for the bosses.
My reform proposal gives workers quarterly information about
their investments. It expands workers' access to sound investment
advice and allows them to diversify out of company stock. The
House has passed these measures. I urge the Senate to do the
same.
Tougher laws and stricter requirements will help. It'll help.
Yet, ultimately, the ethics of American business depend on the
conscience of America's business leaders. We need men and
women of character who know the difference between ambition
and destructive greed, between justified risk and irresponsibility,
between enterprise and fraud. Our schools of business must be
principled teachers of right and wrong and not surrender to moral
confusion and relativism.
Our leaders of business must set high and clear expectations of
conduct, demonstrated by their own conduct.
Responsible business leaders do not jump ship during hard
times.
Responsible leaders do not collect huge bonus packages when
the value of their company dramatically declines. Responsible
leaders do not take home tens of millions of dollars in
compensation as their companies prepare to file for bankruptcy,
devastating the holdings of their investors.
Everyone in a company should live up to high standards, but the
burden of leadership rightly belongs to the chief executive officer.
CEOs set the ethical direction for their companies. They set a
moral tone by the decisions they make, the respect they show
their employees, and their willingness to be held accountable for
their actions. They set a moral tone by showing their disapproval
of other executives who bring discredit to the business world.
And one of the principal ways the CEOs set an ethical tone is
through their compensation. The pay package sends a clear
signal whether a business leader is committed to teamwork or
personal enrichment. It tells you whether his principal goal is the
creation of wealth for shareholders or the accumulation of wealth
for himself.
The SEC currently requires the annual disclosure of a CEO's
compensation, but that information is often buried in long proxy
statement -- proxy statements, and seldom seen, seldom seen by
shareholders.
I challenge every CEO in America to describe in the company's
annual report, prominently and in plain English, details of his or
her compensation package, including salary and bonus and
benefits. And the CEO, in that report, should also explain why his
or her compensation package is in the best interests of the
company he serves.
Those who sit on corporate boards have responsibilities. I urge
board members to check the quality of their companies' financial
statements, to ask tough questions about accounting methods, to
demand that audit firms are not beholden to the CEO, and to
make sure the compensation for senior executives squares with
reality and common sense.
And I challenge compensation committees to put an end to all
company loans to corporate officers.
Shareholders also need to make their voices heard. They should
demand an attentive and active board of directors. They should
demand truly independent directors. They should demand that
compensation committees reward long-term success, not failure.
Shareholders should demand accountability not just in bad times,
but especially in boom times when accountability frequently
breaks down. Shareholders are a company's most important
constituency, and they should act like it.
The 1990s was a decade of tremendous economic growth. As
we're now learning, it was also a decade when the promise of
rapid profits allowed the seeds of scandal to spring up. A lot of
money was made, but too often, standards were tossed aside.
Yet the American system of enterprise has not failed us. Some
dishonest individuals have failed our system. Now comes the
urgent work of enforcement and reform, driven by a new ethic of
responsibility. We will show that markets can be both dynamic
and honest, that lasting wealth and prosperity are built on a
foundation of integrity.
By reasserting the best values of our country, we will reclaim the
promise of our economy.
Leaders in this room help give the free enterprise system an
ethical compass, and the nation respects you for that. We need
that influence now more than ever. I want to thank you for helping
to restore the people's trust in American business. I want to thank
you for your love of the country, and I want to thank you for giving
me the chance to come and address you today. May God bless
you all."