Pitt wants to disgorge compensation
thedeal.com
by Shanon D. Murray in Washington
Posted 04:50 PM EST, Feb-22-2002
Securities and Exchange Commission Chairman Harvey Pitt said Feb. 22 he intends to pursue disgorging the compensation of managers involved in financial fraud cases.
"Compensation, especially in the form of stock options, can align management's interests with those of the shareholders but not if management can profit from illusory short-term gains and not suffer the consequences of subsequent restatements, the way the public does," Pitt said in a speech to securities professionals in Washington.
"There's a common image of employees losing their life savings and managers walking away with massive amounts of money," Pitt told reporters afterward. "It's very important to me that that picture is changed."
At issue, Pitt said, is when a company posts record earnings for a few years on which managers are compensated, and then there's a massive restatement. Stockholders bear the full impact, he said, while the managers have already been compensated.
"Everything corporate managers are asked to do comes with a short-term view of corporate results," Pitt told reporters. "We have to figure out ways to get people to focus on the long-term."
Going after the compensation of wayward managers comes on top of the SEC asking Congress to grant it the implicit authority to bar directors and officers who have engaged in fraud from serving in those positions again.
The tough stance is part of the SEC's response to the collapse of Enron Corp. The regulator, the Justice Department and numerous Congressional committees are investigating the company and Andersen, its former auditor.
The SEC recently announced that it will propose changes to tighten corporate disclosure rules, which call for filings of financial statements to be made faster and to be broader.
On Friday, Pitt offered no definitive time frame for when the SEC will reveal its proposals to reform the disclosure system. |
