Bush Chides Nation’s CEOs, Threatens Harsher Penalties
WASHINGTON — Lecturing corporate chief executives to set a "moral tone" for running squeaky clean companies, President Bush detailed in a Wall Street speech on Tuesday how the government will crack down and punish executives who knowingly cook...
WASHINGTON — Lecturing corporate chief executives to set a "moral tone" for running squeaky clean companies, President Bush detailed in a Wall Street speech on Tuesday how the government will crack down and punish executives who knowingly cook the books.
Plans include creating a corporate crime task force, beefing up the Securities and Exchange Commission and backing legislation to tighten accounting oversight and increase maximum prison terms for financial fraud convictions.
"More scandals are hiding in corporate America," Bush said. "We must find and expose them now, so we can begin rebuilding the confidence of our people and the momentum of our markets."
Bush’s speech was designed, in part, to bolster investor confidence in light of the recent spate of corporate accounting scandals. All the bad news about billions of dollars in unreported shortfalls — and the resulting layoffs of workers and losses to shareholders — has taken yet another toll on the stock market.
Wall Street’s first impression of the President’s remarks was less than enthusiastic. Afternoon selling drove the Dow Jones Industrial Average down 178.81 points, or 1.9 percent, to close at 9,096.09 and the Nasdaq Composite Index fell 24.48 points, or 1.7 percent, to end the session at 1,381.13.
Ken Goldstein, an economist at the Conference Board, said: "I suspect if the drop in the market is associated with the speech, it is probably because of what [Bush] did not say. Investors were looking for bold solutions to the problem. This is a major problem and demands major answers, and announcing [executives] could face double jail time is not a major change that could prevent this from happening again."
The President used his bully pulpit not just to excoriate bad actors, but alternately called on chief executive officers to set a "moral" or "ethical" tone in their corporate dealings. As part of a 10-point, voluntary plan, he called on stock markets to require a majority of a company’s directors as well as auditing, nominating and compensation committees to have no material relationship with the company. Sounding a populist note, Bush also called on executives to be more direct in reporting the value of their compensation packages to the Securities and Exchange Commission."I challenge every ceo in America to describe in their company’s annual report, prominently and in plain English, details of his or her compensation package, including salary and bonus and benefits," Bush said. "And the ceo, in that report, should also explain why his or her compensation package is in the best interest of the company he serves."
Alan Questrom, chairman and ceo of J.C. Penney Co., said Bush’s speech served to lay out a battle plan of enforcement, much of which is already on the books.
"I’m certainly in agreement with it," Questrom said. "These are subjects that no one can really argue about."
However, Questrom said there are limits to what the government can do because there will always be people who will break the rules.
"Let’s face it, it’s not limited to the business community," he said. "It’s in sports, the church — there’s a lot of dishonesty. The problem is, you can have thousands and thousands of rules, but if people don’t have a moral compass, we’re going to go through this from time to time."
As for Bush’s call for companies to more clearly report and explain ceo compensation, Questrom figured that 75 to 80 percent of major corporations already do that.
"I think [Bush] was making sure all companies follow that," Questrom added.
Lisa Wolski, tax and finance counsel at the International Mass Retail Association, said Bush is "striking the right tone in that he’s trying to reassure investors and markets that fraud is really going to be punished and perhaps more severely than in the past."
However, Wolski said it’s unclear when consumer confidence will be restored. She said, "We’ll see what happens if there is a whole lot more [scandal] out there."
Much of what Bush called for either has to be legislated by Congress or approved by regulators. On Capitol Hill, the Republican-controlled House already has approved an accounting reform bill, and one is under consideration by the Democrat-controlled Senate.
Senate Democrats criticized Bush for not stating his support for their reform plan that has garnered strong Republican backing in the chamber. The bill would create a private, independent body to establish auditing and ethics rules and would discipline auditors. The bill would also limit the consulting work that accounting firms can do for their audit clients."It is not enough to talk about accountability. You have to act to ensure it," said Senate Majority Leader Tom Daschle (D., S.D.), said.
Sen. Jon Corzine, (D. N.J.), former head of the investment bank Goldman Sachs, called Bush’s speech "a grave disappointment."
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)