Hoping to gain momentum from the conviction of the Andersen accounting firm, Democrats are seeking to revive Enron-related reform legislation stalled for weeks by politics and corporate lobbying.
The success of the new legislative push is uncertain, but Senate Majority Leader Tom Daschle (D-S.D.) said he hopes to have a floor vote on an accounting reform bill before Congress recesses for the summer.
The first test of this strategy will come as early as this week. The Senate Banking Committee, headed by Sen. Paul Sarbanes (D-Md.), will consider a measure that would impose tougher accounting standards and establish a new accounting board to oversee the profession.
“There is an impetus to get something done on this,” said Darius Goore, spokesman for Sen. Jon Corzine (D-N.J.), co-sponsor of the bill with Sarbanes. But Goore conceded that the vote in the panel will be close, and that passage is not certain.
Re-energizing the push for Enron-related legislation is indeed a tall order. Reforms that many lawmakers suggested when the Houston energy trader collapsed last fall have been bottled up, and enthusiasm has faded.
Languishing in Congress are proposals to change the accounting treatment of employee stock options in a way that would force firms to report lower profits; set conflict-of-interest rules for stock analysts and accounting firms; and require that boards of directors be more independent of management.
“I think Andersen puts the problem back into focus,” said Ken Johnson, spokesman for Rep. Billy Tauzin (R-La.), chairman of the House Energy and Commerce Committee. “If the Justice Department goes after Enron now, as we suspect, certainly the momentum is going to build.”
One looming question is whether Congress should impose reforms through new laws or whether regulators should make the changes through new rules.
While some lawmakers want to press forward with legislation, others, such as Sen. Joseph Lieberman (D-Conn.), chairman of the Senate Governmental Affairs Committee, are content to let the regulators do their job before stepping in.
And some regulators are eager to seize the initiative. The Securities and Exchange Commission, for example, has grown more active in pursuing reforms. SEC Chairman Harvey Pitt wrote a letter to President Bush on Monday saying that his agency is in the process of adopting 10 reforms the president has recommended.
On Thursday, Pitt said the SEC will propose an independent oversight board to regulate the accounting profession, replacing the Financial Accounting Standards Board, a private organization. The new board would impose tougher standards on auditors, according to Pitt, and ensure that companies don’t hide transactions that put them in jeopardy, as Enron did.
But some note that such rules can be rescinded more easily than laws, and Goore, Corzine’s spokesman, said Congress should create an independent board over the accounting profession.
Unlike a weaker bill approved by the House, the Senate bill would provide financing for the new oversight board by assessing fees on accounting firms and their corporate clients and give it “full authority” to obtain documents and require testimony during investigations.
Rep. James Greenwood (R-Pa.), chairman of the investigations panel of the House Energy and Commerce Committee, said he is still enthusiastic about pushing changes even though the reform movement has hit a snag and some Republican leaders oppose strong action.
“I think the conservative leadership in the Congress confuses the kind of necessary reforms that would restore investor confidence with an overreaching, meddlesome Congress dipping its hand into corporate governance,” Greenwood said.
In addition to accounting reforms, Greenwood would like to see Congress approve his bill to set up a presidential commission that would recommend reforms to make corporate boards more independent of management.
It remains to be seen whether a jury’s finding that Andersen was guilty of obstruction of justice will inject momentum into this proposal and others.
Heavy lobbying by Corporate America, especially Silicon Valley firms, has apparently sunk legislation that would require companies to account for their stock options in a way that would deduct them from profits.
Measures to reform pension laws so that employees no longer lose their life savings in corporate-sponsored accounts, such as 401(k) plans, have been stalled as Democrats and Republicans argue over details.
Patrick Basham, senior fellow at the Cato Institute, a libertarian think tank, said he doubted serious reform legislation will be passed by Congress this year. Republicans and Democrats are using the issue to play to their political bases with an eye to the November elections, he said.
He said the GOP will argue “the private sector can take care of things” while Democrats will capitalize on the party faithful’s distrust of big business.
