FOR IMMEDIATE RELEASE

RESPONSE TO PRESIDENT BUSH'S "NEW ETHIC OF CORPORATE RESPONSIBILITY"

Washington, DC – The Council of Institutional Investors, an organization of some 250 pension funds and investment-related firms responsible for nearly $2 trillion of pension assets, July 9 called President Bush's "New Ethic of Corporate Responsibility" too little, too late. The latest speech offers nothing new for investors, said Sarah Teslik, executive director. Most of the recommendations were detailed four months ago in Bush's 10-point program for reform, and the few new items have already been proposed by others.

Investors, who have lost billions due to recent accounting frauds, welcome all meaningful steps to reform the systems governing U.S. companies, accountants and company executives and directors and to better protect investors in the U.S. capital markets. Unfortunately, President Bush's program doesn't go nearly far enough to ensure that long overdue, systemic changes are enacted that will prevent future Adelphias, Enrons, Global Crossings and WorldComs.

President Bush's continued emphasis on enforcement and criminal sentences are politically easy answers that will not stop corporate fraud or restore investors' faith in the U.S. capital markets. Nor will his reliance on the good faith of U.S. corporate executives and boards to police themselves.

The Council urges President Bush to put the full force of his office behind all efforts to enact the strongest possible legislation and regulations. The president's leadership is necessary to force legislators and regulators to resist efforts by the corporate community, the accounting profession and others to weaken proposed reform efforts.

This isn't a time for rhetoric; it's a time for reforms with real teeth. The recent spate of corporate scandals—not the first in U.S. history nor, probably the last—has shaken investor confidence in the American capital markets. This "crisis of confidence" demands immediate and meaningful action by regulators, self-regulatory organizations and legislators.

The Council of Institutional Investors has been a voice for investors for more than 15 years. Over the years we have consistently urged regulators and legislators to reform antiquated "safety nets" intended to protect investors. The Council believes the following reforms continue to be necessary:

• The Securities and Exchange Commission must have a full roster of strong, independent-minded Commissioners in place. The backgrounds of SEC Commissioners should be broad and varied. Commissioners shouldn't come predominantly from the accounting profession.
• Auditors must be prohibited from providing most non-audit-related services to audit clients, and a strong, full-time, independent industry oversight board need to be put into place.
• Companies should be required to provide details on the relationships between directors and the companies on whose boards they serve.
• The Nasdaq Stock Market, the New York Stock Exchange and other exchanges should be required to adopt identical, strong corporate governance listing standards, including stringent requirements for independent directors and a tough definition of "independent." Recommendations drafted by the New York Stock Exchange's Corporate Accountability and Listing Standards Committee should be considered minimum requirements, and both exchanges should be urged to consider tougher standards.
• In addition to shareholder votes on stock option plans, stock options should be expensed on corporate income statements.

For questions or comments please call the Council at 202.822.0800.