"ACCE-U.S. Chamber CEO Leadership Conference" by Thomas J. Donohue

Pasadena, CA
July 28, 2002

Reaction to Corporate Governance/Accounting Reform Bill

Recent episodes of corporate misconduct have dramatically changed the mood, politics and legislative agenda on Capitol Hill over the past several weeks.

With the Chamber figuring largely in the debate, Congress passed a corporate governance and accounting reform bill with amazing swiftness.

Generally speaking, the Chamber is encouraged by the action taken by Congress. The bill contains several provisions the Chamber strongly supported, including:

• Tougher criminal penalties;
• New disclosure requirements;
• A requirement that CEOs and CFOs certify the accuracy of financial reports;
• Pension protection for workers, including prohibiting senior executives from buying or selling stock during "blackout periods"; and,
• Increased oversight and enforcement powers for the SEC.

However, some provisions contained in the final bill could have unintended consequences for small and large businesses and hurt our economic recovery.

Creating a new class of corporate criminals, inviting attorneys into boardrooms, and reducing the ability of business owners to make decisions about their companies operations — like this bill does — might win lawmakers some political points, but it will do nothing to restore confidence in our markets or the economy.

In fact, it will make corporate managers more uptight and tentative at a time when they need to take more risks and be more creative in order to revive the economy.

Economic growth is powered by people who aren't afraid of failure. This bill creates a risk-averse culture in which business leaders will be inclined to continually look over their shoulders, second-guess themselves and try to avoid any appearance of making a mistake.

This is not the way of our free enterprise system.

But trying to stop this legislative locomotive was a very difficult task, given the media feeding frenzy. In an election year, Congress couldn't pass up the opportunity to appear "responsive" — even if that meant voting for ill-advised, short-sighted policies that will do more harm than good.

But what's done is done. We liked some things in the bill; we didn't like others.

The important thing now is to move forward and finish the job on TPA, homeland security, energy legislation and other economic growth policies, or else the NEXT scandal in this country will be a government that fails to act on the critical needs of its people and fails to get a grip on its own budget and accounting mess.

Business is moving fast to clean up its flaws and secure the future of the American free enterprise system. What about the government?

Some in Congress don't want to move forward. They are waiting for additional reports of corporate wrongdoing so they can wallow in and exploit these scandals from now until Election Day. They'll continue to disparage the business community because they think that we are an easy target.

The Positive Role of Business

The business community must stand up and defend itself. Yes, we must continue to condemn illegal and unethical action, but at the same time we must state that it is wrong and unfair to tarnish all businesspeople for the bad conduct of a few.

There are 17,000 public companies in the U.S. Only a very small fraction of them have been accused of any illegal or unethical behavior. The overwhelming vast majority of businesses do a lot of good in our society.

Business supports and voluntarily provides:

• More than 130 million jobs and health care to 177 million people;
• $20 billion in charitable contributions every year; and,
• $150 billion annually to clean the environment

The business community is largely responsible for generating our nation's $10.4 trillion gross domestic product, a 40% rise in median income over the last decade, and a level of broad-based prosperity that has enabled two-thirds of American families to own their own homes.

Business deserves better than the treatment it is getting.

Chamber Strategy

So what is the Chamber prepared to do to repair the business community's damaged reputation?

Well, we hope to unleash a television, radio and print media advertising campaign aimed at restoring public confidence and trust in business, our markets, and the economy.

We will advance the dialogue on more comprehensive, long-term reforms in accounting and tax policy.

Through a series of forums sponsored by our National Chamber Foundation, we will focus on issues such as the future of GAAP accounting, reforming the tax system, and the relationship between stock analysts and the financial institutions they work for.

Finally, I will travel to European financial capitals to remind them that the U.S. is still number one in transparency, and that their criticism of the U.S. economy and our markets will only hurt their own. When our economy sneezes, theirs catches pneumonia.

Fundamentally Strong Economy

Fears in our country and around the world that the struggling U.S. stock market will ruin our economy are unfounded. Let's remember that the stock market and the economy operate independently of each other. One is not an indicator for the other.

While the stock market has suffered, the U.S. economy has shown remarkable resilience after 9/11 and the 2001 recession, growing better than 6% in the first quarter of this year and projected to grow between 2.5% and 3% for the entire year.

The fundamentals of our economy are strong:

• Consumer spending remains strong
• Productivity is expanding
• Inflation is low
• Interest rates are low
• Real wages are growing
• Job creation is solid, and
• New home sales reached a record level in May.

America's long-range prospects are bright—high productivity, science and technology leadership, openness to foreign talent and capital, and millions of creative entrepreneurs all add up to a very bright future.

So the Chamber Federation's job is to encourage the country to capitalize on its strengths, to take the steps necessary for strong and sustainable economic growth …the policies we've been working on together for some time—Trade Promotion Authority, a national energy strategy, terrorism insurance legislation, investment in infrastructure, regulatory reform, and legal reform.

It's time for everyone whose job it is to defend the business community and fight for its interests to stand up proudly and celebrate who we are and what we do.

Being positive, proud, and protective, yet critical and demanding… that's our job. Let's make sure we do it. Thank you very much.