Business Group Calls for Disclosure

Corporate leaders should be required to announce in advance plans to sell company stock so they can't take advantage of inside knowledge that allows them to predict fluctuations of shares better than the investing public, a leading business group said Tuesday.

The proposal by a commission formed by the New York-based Conference Board is designed to help restore investor confidence amid an atmosphere of deepening suspicion that top business executives have been out to enrich themselves at the expense of average shareholders.

"Public trust requires public confidence that markets are not rigged," said Peter Peterson, co-chairman of the Conference Board's commission on public trust and private enterprise.

Peterson, a former commerce secretary and chairman of The Blackstone Group, said the commission has not yet decided how much advance notice executives should provide about impending stock sales.

But the commission is considering asking corporations to require their executives to make their intentions about stock sales public 30 to 60 days before the trades occur, said the commission's other co-chairman, CSX Corp. chairman John Snow.

He said the commission wants to eliminate "this spectacle of executives selling shares at a time when they are encouraging the public or their employees to hold onto shares."

Executives generally file a document with the Securities and Exchange Commission that is available to the public when they sell stock in their companies -- so they can avoid other complicated filing requirements.

In theory, executives can file the document up to 90 days before they make the transaction, but the disclosure almost always happens when the order to sell stock is placed.

The Conference Board's commission, formed in June, has been working on a wide range of recommendations to restore confidence in corporate America. Other proposals still being developed include recommendations on reforms for improved corporate accounting, auditing and corporate governance.

Tuesday's proposals focused solely on executive compensation, and commission members said they did not plan to ask authorities to make new laws to require enforcement. Instead, they will mount a campaign to convince corporations to voluntarily adopt the standards.

Commission members acknowledged they may face stiff resistance to the advance stock sale notification proposal, and an expert on insider trading doubted many corporate boards would put the recommendation into practice.

"Realistically, I think it's unlikely corporate executives would want to provide advance information about what they are doing or thinking about doing," said Peter Romeo, a lawyer specializing in securities laws. "Most corporate boards are made up of people who have been insiders or still are."

Other recommendations the commission said corporations should adopt included:

-- Requiring corporate board compensation committees to hire outside compensation consultants to examine executive pay so the executives themselves don't use consultants to co-opt board members to sign off on lavish pay packages.

-- Requiring executives to hold a meaningful amount of company stock on a long-term basis.

-- Avoiding the use of so-called "special purpose entities" to compensate or enrich executives. Prosecutors allege that some former Enron executives were able to transform amounts of less than $500,000 into millions by using the complex financial transactions.

The Conference Board is the world's largest business membership and research organization. It produces the index of Leading Economic Indicators and the Consumer Confidence Index.