WASHINGTON – Tying the unity spurred by the Sept. 11 attacks to the Enron collapse, President Bush said corporate good citizenship is a way to show that the free enterprise system draws upon the best in people.
The president detailed plans for corporate responsibility in a speech Thursday that focused on ushering in a new era of business ethics.
Bush wants corporations to provide more information to investors, and he wants chief executive officers to be more responsible for that information. No longer will "I don't know" — used by former Enron CEO Kenneth Lay to shift blame for his companies failings — be an excuse for a company's financial misrepresentations, Bush said.
"Business people must answer not just to the demands of the market, or self-interest, but to the demands of conscience. The bottom line of the balance sheet defines a business' goal, but not the sum of responsibilities of its leaders," Bush told winners at the Malcolm Bladridge award ceremony, an annual event that honors good corporate citizenship in the name of the former commerce secretary.
In fact, when a company's worth is artificially inflated, as was the case with Enron, Bush said he wants executives to give back any bonuses they got based on their false reporting. He also wants them to report within two days when they buy and sell shares from their companies.
The president said he wants to create an agency to monitor the accounting industry. The regulatory board, to be under the supervision of the Securities and Exchange Commission, would develop professional standards of conduct and competence. "Ethics principles" would be monitored and enforced by the board.
The demands come in the wake of Enron's Dec. 2 bankruptcy, in which the Houston based energy conglomerate hid more than $1 billion in debt and its auditors endorsed its financial statements.
Enron executives got bonuses totaling some $320 million last year alone as rewards for hitting stock-price targets, which were higher than they should have been because executives were lying about company profits, investigators say. On top of that, its auditor Arthur Andersen was approving its financial reports.
Many of Enron's shareholders lost their entire retirement savings and investors were unnerved by the apparently deliberate shifting of debt to offshore partnerships.
With Congress considering legislative action of its own, Bush's 10-point plan combines various proposals made by SEC Chairman Harvey Pitt and lawmakers.
Bush did not mention Enron or Andersen, but seemed to be speaking of the accounting firm when he mentioned auditing standards. "We've seen lately just how important these standards are and the harm that can follow when they are ignored," he said.
Pitt, who was appointed by Bush, has proposed a new private-sector body to regulate the accounting profession. It would be dominated by executives and experts from outside the accounting industry. Some experts prefer a federal regulatory agency, arguing that the current self-policing of the accounting industry allowed Andersen to consult a company it was auditing.
Under Bush's proposal, the government would bar external auditors from performing any other services such as consulting for the same corporate client if that other service compromises the independence of the audit.
Fox News' Wendell Goler and the Associated Press contributed to this report.