Corporate Fraud Bill has Power of Scrutiny, Not Punishment, Says Compensation Design Group.

Business & Political Editors

NEW YORK--(BUSINESS WIRE)--Aug. 6, 2002

The corporate fraud bill Congress passed last week doesn't have enough power to adequately scare corporations into compliance, but its strong provisions may force companies to think twice before continuing to operate with a nod and a wink, according to Frank Glassner, CEO of Compensation Design Group.

"It's a baby step in the right direction," said Glassner, a 27-year veteran of executive compensation. "Funding has to be available to ensure that the SEC can implement rules and establish an oversight board to investigate and punish. Without that, the corporate fraud bill is like the 'Just Say No To Drugs' campaign decades ago -- ineffective and easy to ignore."

Glassner said that everyone from discontented shareholders to employees from bankrupt companies have called for reform in corporate America. "The corporate fraud bill puts CEOs and boards on notice that the kind of corporate shenanigans we've seen in the past year will no longer be tolerated, but we're far from seeing the end of the era of greed. The bill simply places us at the beginning of the era of scrutiny."

Glassner said certain key provisions of the bill would force companies to play it safe since they will be under closer examination. "For example, the provision requiring CEOs and CFOs to forfeit profit and bonuses when earnings are restated due to securities fraud, may actually mean the end of paying bonuses to captains of corporate Titanics," said Glassner.

"Some may believe that the corporate fraud bill is too little too late, but after a decade of corporate governance erosion, this bill is at least bringing compliance a little closer to reality," said Glassner. "The bill will prevent executives from receiving company loans unavailable to outsiders. Hopefully, that will stop the ridiculous loans that are rarely repaid for outrageous executive toys or multiple mansions"

Glassner said that the public has seen too many examples of out of control executive greed that has contributed to the disgrace of corporate America. "From accounting debacles that ended in Congressional hearings to a dependency on Wall Street that pushed executives to perform for only one audience, the blunders have reached new lows," said Glassner. "It became increasingly clear that a number of systems had to be overhauled in order to rebuild the public confidence that has crumbled so rapidly."

Glassner concluded that the recent corporate fraud bill might be the beginning of a series of reforms. "With these reforms, coupled with companies making changes on their own, we may finally begin to see the tides turning and see executives taking responsibility for their actions."

Compensation Design Group is headquartered in New York, with offices in Chicago and San Francisco. The internationally recognized firm focuses on delivering cost effective and customized compensation, benefits and human resources programs. Glassner has been quoted on executive compensation issues in numerous publications, including USA Today, US News & World Report and the Wall Street Journal and appears regularly on CNN, CNBC and NBC.