President Bush's call Tuesday for a new ethic of responsibility to shareholders, proposing longer jail sentences for those who defraud investors, and establishing a "financial crimes SWAT team," was meet with generally positive comments from the nation's business community:
-- Nasdaq Chief Executive Officer Wick Simmons said: "The president's Wall Street speech was a much-needed effort to help restore investor confidence in America's capital markets. The president's proposals to establish a Corporate Fraud Task Force, to double maximum prison terms for mail and wire fraud and to enhance prison time for criminal fraud are tough but necessary actions that must be taken in the current climate of investor skepticism. The president's recommendations are consistent with the reform principles Nasdaq has set forth and which it expects executives of its listed companies to faithfully adhere to."
Simmons continued, "The effectiveness of the world's capital markets depends on personal integrity and public trust. Ultimately, it's all about character and values. Nasdaq fully shares the President's belief that free and fair capital markets demand a renewed commitment to a higher corporate ethic, true board independence, information transparency and swift, harsh and certain punishment of acts of corruption. Those principles deserve the support of each and every capital market participant."
-- United States Chamber of Commerce President and CEO Thomas Donohue, said: "The president made it clear: fraud and corruption by our business leaders will not be tolerated. The Chamber supports the president, the Congress, our regulatory agencies and the business community working together to drive out dishonest people, protect the interests of investors and workers to restore confidence in our financial system.
"We welcome public scrutiny and constructive criticism, believing there is no institution anywhere in our society that cannot be strengthened or improved. Yet, we must not lose sight of the executives at the 17,000 public companies in the U.S. who every day go about their work with honesty and high ethical standards. "We must remain focused on fixing the problems at hand and not leveraging the misconduct of a few bad players for political gain. The Chamber calls for responsible leadership in Congress from both parties to help strengthen our economic infrastructure without compromising job creation and entrepreneurship."
-- Linda K. Trevino, professor of Organizational Behavior and Chair of the Department of Management and Organization in Penn State's Smeal College of Business, said: "It's better than the generalities we've heard so far. But, I don't think it goes far enough in some areas. Requiring CEOs to personally vouch for the veracity of their firms' financial statements should focus their attention and is welcome. Banning corrupt corporate executives from ever serving again as leaders of public companies is also a good idea. But, if we're going to put more of these corporate criminals in jail, new or altered laws may be required. I'm not a lawyer, but it's my understanding that it's very difficult to prosecute these executives because one must prove criminal intent. I'm always amazed at how easy it is to put a kid in jail for shoplifting or having some drugs in his pocket, but we can't successfully prosecute someone who ruins the lives of thousands of people and puts our entire financial system at risk."
"The boost to the SEC budget is also welcome, but is still inadequate. The increase in staff may not be enough. Plus, in order to retain the people who are hired, compensation needs to increase dramatically. Turnover at the agency has been outrageously high, in part because of inadequate compensation. "
"I don't understand exactly what this Corporate Fraud Task Force is and what it will accomplish. It doesn't sound like the president is adding staff. So, I'm confused about that. "
"Some of the rest of the speech was just too general to comment on. In the end, I don't agree with the president's sentiment that "ultimately, the ethics of American business depend on the conscience of America's business leaders." We've seen where that attitude has gotten us and it ignores what we know from research about moral development. Most of America's business leaders are just people -- people who are subject to external pressures when it comes to ethics."
-- TechNet, a national network of high-tech and biotech companies, said President Bush's call for strong corporate governance reforms would help target and rectify corporate abuses. According to TechNet chief executive officer, Rick White, the speech underscores the growing consensus in Washington that leaders must focus on the real problems of fraudulent behavior and bad accounting facing America's free enterprise system and avoid hasty reactions. "TechNet applauds President Bush for his leadership on the issue of corporate governance and for proposing that executives who break the law should get more jail time," White said.
"Strong action must be taken to hold accountable executives who would betray the public trust and there's no better way to get their attention than to threaten to send them to jail," White added. "Both the president and Congress have put forward solutions to the real problems, instead of offering knee-jerk reactions that will damage the ability of our country to compete."