AFT - American Federation of Teachers

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AFT Resolutions

PROTECTING WORKERS' RETIREMENT SECURITY AND PREVENTING FUTURE ENRONS

WHEREAS, Congress and the courts are looking into the actions of top officers and accountants of several corporations, including Enron, WorldCom, Tyco, Global Crossing and others that have resulted in some of the largest corporate bankruptcies in U.S. history; and

WHEREAS, corporate officers enriched themselves by billions of dollars even as shareholder equity plummeted, wiping out the retirement security of tens of thousands of employees who, unlike top executives, are barred from freely selling company stock in their 401(k) funds; and

WHEREAS, the impact of the actions of corporate executives and accounting firms, such as Arthur Andersen, continue to ripple through the wider economy, devaluing individual retirement accounts and public and private sector pension funds; and

WHEREAS, self-dealing, conflicts of interest, irregular accounting and financial reporting practices among corporate officers, boards and auditing firms threaten the savings and pensions of workers and the health of the entire economy; and

WHEREAS, this debacle clearly illustrates the failure of auditing firms in a privatized, self-regulated environment to avoid conflicts of interest and safeguard the public interest through objective and accurate financial reporting; and

WHEREAS, proponents of privatization, such as investment companies, continue to seek to replace defined-benefit Social Security and pension systems with undependable defined-contribution plans that jeopardize the retirement security of millions of American workers and their families and place the entire burden of risk squarely on the shoulders of beneficiaries, but these proponents failed to assure investors of honest evaluation of stocks and accurate accounting of companies' true worth; and

WHEREAS, only firm and purposeful government intervention and regulation can prevent a repetition of the self-dealing, conflicts of interest and corporate manipulations that brought down seriously harmed employees and investors while enriching top corporate officers and accountants; and

WHEREAS, protecting employees in 401(k)s and ESOPs is vital, as are reforms guaranteeing the accuracy of financial reporting and restoring consumer confidence in our overall economic system:

RESOLVED, that the AFT and the AFL-CIO take all appropriate legislative, political and legal measures necessary to preserve, protect and strengthen the retirement security of union members, working people and their families by curbing the abuses that precipitated the recent corporate financial scandals and preventing their repetition; and

RESOLVED, that the AFT and the AFL-CIO take such steps as may be necessary and appropriate to defend, preserve and strengthen pension systems, promoting securely funded, prudently managed defined-benefit retirement plans; and

RESOLVED, that the AFT work with the AFL-CIO to investigate ways to support the victims of such wrongdoing in finding legal avenues of redress, including participation in individual and investor class actions where warranted, against the corporate officers and accounting firms that have violated the law, seeking recovery for losses caused by self-dealing, mismanagement, conflicts of interest and other potential illegal behavior; and

RESOLVED, that the AFT and the AFL-CIO work together to urge Congress and the executive branch to support legislation, such as "The Public Company Accounting Reform and Investor Protection Act of 2002" (S. 2673), which includes accounting and security to industry reforms that would prevent companies like Enron from "cooking the books" and protect individual investors, employees' 401(k) and Employee Stock Option Plans (ESOP) pension plans and defined-benefit pensions systems:

Such changes should include:

  • Prohibiting auditing companies from providing any non-audit services to their clients.
  • Radically reforming the grossly inadequate oversight procedures used in the accounting industry, including expanding the federal regulatory role in establishing objective accounting procedures and increasing criminal and civil penalties for violations.
  • Requiring that at least two-thirds of the board of directors of publicly held companies consist of individuals outside the corporation and adopting requirements similar to those of the California Public Employees Retirement System mandating disclosure of outside director links to other companies, establishing standards to assure that independent directors are truly "independent" and requiring corporate boards to establish an auditing committee solely composed of independent directors charged with reviewing audits and hiring and firing auditors free from management participation.
  • Strengthening the Security and Exchange Commission's ability to enforce the laws by providing the legal authority and necessary personnel to effectively regulate corporate behavior.
  • Prohibiting the use of financial instruments that convert corporate debt into equity and denying tax deductions for such instruments.
  • Developing rules on the use of stock options to remove incentives for short-term stock manipulation benefiting corporate executives rather than using them as a tool for long-term growth benefiting investors and requiring that stock options be deducted from a corporation's earnings.
  • Granting employees in 401(k) plans and ESOPs the right to sell stock provided by the employer in its own company one year after receiving it and the right to sell any stock purchased with their own money without a waiting period.
  • Reforming the rules surrounding "blackouts," the time when sales of company stock in defined-contribution pension plans are prohibited, requiring employees be notified 30 days before a blackout is imposed and that such blackouts last no longer than 10 days and apply to managers as well as employees.
  • Requiring that advice from truly independent investment advisors "not those chosen by the corporation" on the importance of investment diversity be available to all beneficiaries; mandating that plan administrators inform employees each year about the content of their pension plan, whether it exceeds a prudent investment limit in any one stock and any failure to comply with prudent investment standards; requiring that employees acknowledge in writing that they have been so informed; and facilitating such truly independent counseling by treating it as a pre-tax expense.
  • Finally, amending the "Private Securities Litigation Act" (PL 104-67) to allow class-action suits against accounting firms and companies that fail to provide clear and factual information in their audits.

(2002)