WHEREAS:
A direct result of the widely publicized Enron Corporation bankruptcy was the loss of employment, health care coverage and retirement savings of more than 6,000 Enron employees; and
WHEREAS:
Public pension systems in which AFSCME members are beneficiaries and participants lost more than $1.5 billion in retiree assets as a result of the Enron debacle; and
WHEREAS:
The senior managers of Enron were paid scandalously large 'bonuses' in the days and weeks immediately prior to the Enron bankruptcy filing; and
WHEREAS:
Enron's matching contributions to the 401(k) plan were made in Enron stock that could not be sold, and employees were encouraged by management to invest their own contributions in Enron shares at the same time that senior managers were selling shares they had acquired through stock options; and
WHEREAS:
The loss of retirement savings illustrates the risk inherent in defined contribution pension plans, which do not provide a guaranteed retirement benefit. Defined contribution plans have become common in the private sector, as employers attempt to shift cost and risk onto their workers. There is a concerted effort by the American Legislative Exchange Council (ALEC) and a number of Wall Street investment advisors to promote defined contribution plans in the public sector; and
WHEREAS:
Enron issued misleading or false audit reports, inaccurately reported tax information and misreported income with the knowledge and assistance of its 'independent' auditors; and
WHEREAS:
All of these actions were undertaken with the consent of the members of the Enron Board of Directors, according to the independent Powers Commission Report; and
WHEREAS:
The federal Securities and Exchange Commission should have the direct authority to ban corporate directors who have engaged in criminal or misleading behavior; and
WHEREAS:
The California Board of Regents, along with dozens of other public and Taft-Hartley pension plans, have filed suit against Enron Corporation, Arthur Andersen and others to reclaim from the company and its senior managers some portion of their investment losses.
THEREFORE BE IT RESOLVED:
Employer contributions to 401(k) plans should not be allowed to be made exclusively in the stock of the employer and the ERISA maximum limits on defined benefit pension plan investments should apply equally to individually-directed deferred compensation arrangements; and
BE IT FURTHER RESOLVED:
AFSCME shall continue to actively resist efforts to convert defined benefit pension plans to defined contribution plans; and
BE IT FURTHER RESOLVED:
Standards for auditor independence must be established to prohibit accounting firms from doing consulting and audit work for the same entity to prevent conflicts of interest. Audit related services should be allowed only if there is a review by an independent audit committee and disclosed in the company proxy; and
BE IT FURTHER RESOLVED:
State laws, stock exchange listing requirements and federal regulations should be reformed so that corporate directors owe their allegiance and due diligence to the stockholders rather than senior management. In addition, shareholders should be given direct access to the company proxy so that they can run their own independent board candidates; and
BE IT FINALLY RESOLVED:
Penalties for criminal activities of a corporation should be imposed directly upon those members of senior management and the board of directors who perpetrated such wrongdoing, or who knowingly failed to act within the scope of their authority and responsibility to correct such wrongdoing. Fines, or, if appropriate, incarceration, should be imposed upon these individuals.
SUBMITTED BY: INTERNATIONAL EXECUTIVE BOARD