(Following are excerpts from a statement issued by the AFL-CIO Executive Council on Feb. 27. To read the full statement, which includes a great deal of information omitted here for reasons of space, visit www.aflcio.org/publ/estatements/feb2002/governance.htm. The web site includes an enormous amount of material about the Enron debacle.)

The sudden and spectacular collapse of Enron, the seventh largest corporation in America, has exposed the culture of greed that permeates most major corporations, often in wanton disregard of workers’ and investors’ rights and interests. While top Enron executives and insiders made fortunes, workers lost their jobs, their health care and their lifetime savings for retirement. Other investors lost virtually everything.

The Enron bankruptcy has exposed major vulnerabilities in working families’ retirement security. It has raised public questions about defined contribution pension plans. And it has focused attention on the threat posed by proposals to privatize Social Security, which would trade in the system’s guaranteed benefits for individual accounts like those held by the employees of Enron.

The company’s calamitous and scandalous downfall has also lifted the boulder of corporate governance to reveal a wriggling mass of deception, self-dealing, conflicts of interest, influence-peddling and manipulation of laws and regulations that imperil our entire economic system.

At the same time, the Enron debacle has raised significant questions and heightened concerns about the motivations and trustworthiness of the corporate interests that appear to be driving energy policy, especially deregulation, at the national and state levels. It has raised, once again, questions of equity and wisdom in national tax policy, which allows major corporations such as Enron to shield earnings from taxation. And it has focused attention on the unseemliness of giving companies major infusions of taxpayer dollars through federal contracts, with those companies all the while violating public laws and breaching public trust with impunity.

Although the scandal’s fallout is particularly evident in Houston and Washington, its effects touch almost every family in America, many of them very dramatically. Union members are among the Enron workers who were hit hard, as were all Enron employees who were heavily invested in company stock. But the pension investments of nearly all workers have been affected, since most mutual funds held Enron shares. All working families, investors and communities stand to lose even more if the schemes and the culture that Enron represented and promoted continue to go unchecked.

The AFL-CIO and unions representing workers employed by Enron and its subsidiaries have mobilized in response to the Enron scandal. We have provided direct assistance to workers, including legal assistance to many who were seeking full and fair severance payments in bankruptcy court. Even before Enron was a household word, we filed petitions with the SEC calling for greater independence of auditors and company boards. We have testified before congressional committees and brought Enron workers to Congress to share their experiences at the hands of a company they trusted. AFL-CIO affiliates are engaged in discussions about bargaining for greater protections of worker savings accounts in other companies with similar problems. We have been taking the lead in demanding that members of the Enron board resign from the two dozen other companies where they sit in positions of fiduciary responsibility.

But we recognize that the wrongdoing and fall-out from Enron and the criminal acts of its managers, egregious though they are, are not the whole story, and our efforts cannot stop with it. Enron is not simply a case of a single company gone bad: it is a broader story about risks and losses for workers who play by the rules while their employers breach their trust; about a system of corporate governance that insulates executives and corporate insiders while exposing investors, workers and the public at large to enormous – and frequently unknown – risks; and about other laws and regulations that shield wrongdoers from real accountability for their conduct.

THE LESSONS ARE CLEAR

The lessons from Enron are stark and clear: the public policy agenda promoted by Enron and like companies is bad for all Americans; investors, workers and communities are all stakeholders in these corporations, with interests that need and deserve protection; and regulation of corporations and changing their governance is the only way to ensure the protections and transparency stakeholders deserve.

For that reason, the AFL-CIO calls on Congress, the President and federal regulators to enact and enforce broad, specific reforms to strengthen and protect workers’ retirement security, to hold corporate executives and directors to higher standards in governing corporations’ affairs, and to make them accountable for their malfeasance and breach of trust.

The Enron scandal underscores the importance of the labor movement’s longstanding commitment to maintaining “a strong national retirement system that is built on a foundation of guaranteed Social Security benefits supplemented by employment-based pensions and private savings,” a position reaffirmed in December by delegates to the AFL-CIO convention. Defined benefit plans remain the best and soundest vehicles for building and safeguarding retirement income and security. Defined contribution plans such as 401(k) plans are not substitutes for pensions, but to the extent that they provide additional savings for retirement, our laws and regulations must include at least the following minimal safeguards to enhance protections for workers and stop corporate abuses.

1. Congress and regulators must put into place significant and meaningful reforms that give workers a real voice in running their 401(k) plans and real choice in managing their investments. Giving workers real voice and real choice means ensuring their active participation in overall plan management; providing them with the information they need to make reasoned decisions; and empowering them to make and act on decisions promptly.
2. Congress must enact new safeguards to prevent employer manipulation of employees’ investment choices. Workers should have a broad right to sell company stock held in their defined contribution retirement accounts in favor of diversified investment options. This right should extend to their own contributions and to employer matching contributions to their 401(k) accounts and should take effect as soon as the contributions are made.

REFORMING CORPORATE GOVERNANCE AND BEHAVIOR

Congress and the Securities and Exchange Commission must promptly consider and enact proposals for reform of corporate regulation and governance and disclosure requirements to eliminate conflicts of interest and to enhance protections for investors.

1. Corporate directors must be truly independent of the CEO and corporate management they are overseeing, and boards of directors should be broadly representative and fully accountable.
2. The accountants who audit a company must also be truly independent, and there must be meaningful public oversight and accountability of the accounting industry as well as legal advisors.
3. Wall Street investment analysts must be independent from investment banking operations, and investment managers must vote shareholder proxies in the interests of worker beneficiaries.
4. Congress must change bankruptcy laws to give workers’ claims for severance and pension fraud parity with the claims of other creditors and to prevent companies from hiding assets in bankruptcy proceedings.
5. The rules governing executive compensation must be changed so that company executives cannot continue to cash in, regardless of their performance, the health of the company or employees’ job and economic security.

Going forward: an action agenda in the wake of Enron: In response to Enron and the opportunities and challenges it presents, the AFL-CIO and its affiliates will:

• Educate our members and other workers about retirement security and corporate governance issues, in order to empower workers and their families to make informed judgments about their economic future and to enlist them in a variety of advocacy campaigns (corporate, bargaining and legislative, for example) designed to increase protections for workers while ending corporate excess and abuse;
• Aggressively promote a comprehensive retirement security reform agenda, which includes pension law changes to promote the creation and expansion of defined benefit plans, as the safest and best way to build retirement security for working families, and to provide greater protections for workers and other investors who seek to supplement their retirement nest eggs through contributions to defined contribution plans; and measures to strengthen and protect Social Security, while resisting efforts to privatize the program;
• Undertake campaigns (such as the Enron Director and the Motorola campaigns) and rulemaking or other regulatory initiatives to raise public and policy-maker awareness of how corporations are organized, governed and operated; create an environment favorable to change; and win major corporate accountability reforms;
• Hold policy-makers and elected officials accountable for the actions they take or refuse to take on retirement security and corporate governance issues when assessing their working family voting records and making decisions about endorsements or other support.