Pension Funds Seek Tougher Audit Rules

By Albert B. Crenshaw
Washington Post Staff Writer
Tuesday, February 5, 2002; Page E01


Pension funds and other large nonprofit investors, which among them lost $1.5 billion in the collapse of Enron Corp., yesterday called on Congress and the Securities and Exchange Commission to impose tough new rules on corporations and their accountants to prevent similar catastrophes in the future.

At the same time, some of the representatives of the Council of Institutional Investors expressed frustration, noting that past efforts had fallen on deaf ears.

"We've been asking for reforms for years, but no one has been listening," said Ron Richardson of the Hotel Employees and Restaurant Employees International Union."We are not optimistic we will do better post-Enron."

George Philip of the New York State Teachers' Retirement System urged investors and others to focus not on"what gets said" but on"what gets done."

"We want Enron to be a catalyst" for reform, he said.

The council has written letters to SEC Chairman Harvey L. Pitt and congressional leaders demanding:

• Tightening of rules on auditor independence. The council asked the SEC to bar auditors from providing non-audit services to their clients. And it wants the agency to consider, among other things, requiring companies to change auditors every few years.

• Dramatic changes in oversight of auditors. Saying"it's clear that the... current system of self-oversight is not working," the council wants the SEC to come up with a new system, and in doing so to consider the views of investors as well as those of the accounting profession.

• Increased disclosure of director ties to their company."Director independence is an issue of fundamental importance to... investors," the council said, but"all too often shareholders aren't aware of significant links between directors and companies and executives until it's too late." For example, the council said,"We think it's meaningful to know if a CEO's personal attorney sits on the board or if the director works for a nonprofit that receives significant contributions from the company."

• Increased SEC pressure on stock exchanges to tighten rules on boards of directors' independence and composition, bringing in more independent outside directors and requiring that only independent directors comprise audit, compensation and nominating committees.

The council also urged the SEC not to soften its enforcement efforts and to take other measures, such as barring brokers from voting shares on"routine" issues such as choice of auditors."As Enron has shown, these proposals are not 'routine,'" the council said.

Council members emphasized yesterday that they regard boards of directors and other aspects of corporate governance as the key to preventing further Enrons -- even more than auditor reforms.

"Issues of corporate governance... have clearly come to roost," said Damon Silvers of the AFL-CIO.

Several representatives found hope in the fact that the Enron case has sparked new interest in pension issues among the funds' 20 million participants.


© 2002 The Washington Post Company

<center>

<HR>

</center>