Protecting Californians: Corporate Accountability
Governor Davis directed his Administration to act swiftly to fight corporate fraud and abuse. Today, California's corporate accountability laws - already the toughest in the nation - are even stronger.
For Californians, the right to privacy has always been sacred. In August 2003, Governor Davis continued to protect California consumers by signing into law the California Financial Privacy Information Act - SB 1 (Speier).
This legislation is the strongest of its kind in the nation. It stops banks from sharing vital personal information like social security numbers and spending habits with other companies. It puts consumers back in control of their own personal financial information while still allowing businesses to conduct day to day transactions.
Corporate Accountability Initiatives
- Required companies to retain audit documents and records for a minimum of seven years and prohibited intentional document destruction.
- Required companies to disclose more information to investors and state regulators twice a year.
- Created a new interagency task force to review the new federal corporate accountability law and to recommend steps California could take to improve corporate governance and increase investor confidence.
- Directed the Departments of Corporations and Consumer Affairs to launch a public outreach and education campaign on investor rights and enforcement.
- CalPERS worked closely with congressional staff to help shape the Sarbanes-Oxley bill, ensuring that shareholder protections and good corporate governance principles were included in the bill which was signed into law.
- CalPERS launched a campaign in November 2002 urging corporations that have incorporated offshore to return to the U.S. and stop avoiding their responsibilities to shareowners and taxes.
- CalPERS Board approved a comprehensive action plan to crack down on abusive executive compensation plans in corporate America, hold compensation committees more accountable for their actions and prevent conflicts of interests at investment banks and brokerage houses.
New Protections for Shareholders
In the wake of the Enron collapse, Governor Davis directed his Administration to develop new proposals to protect shareholders, strengthen safeguards against corporate and financial manipulation and fraud, prevent conflicts of interest, and most importantly - to ensure that this type of corporate meltdown doesn't happen again.
The Davis Administration has worked with the Nasdaq Stock Market and the New York Stock Exchange (NYSE) to develop new corporate and investor protections that help restore confidence in the marketplace.
The new corporate governance listing standards will:
- Guarantee that company management and company employees have equal risk and choice when it comes to their stock option plans, by requiring shareholder approval of plan changes.
- Crack down on companies that submit false financial statements by requiring CEOs to certify the accuracy and completeness of financial information.
- Require companies to establish an independent compensation committee to determine the appropriate monetary and stock compensation for management.
- Prevent conflicts of interest among members of the Board of Directors by requiring a majority of a company's board members and of the company's corporate governance committee members to be independent.
California's efforts have led to improved listing standards promoting corporate and financial transparency, as well as management integrity and accountability - all for the benefit of the investing public.
Governor Davis believes free enterprise is good for the economy. However, a healthy system of free enterprise requires a system of checks and balances which protects investors and stabilizes the market.
Governor Davis signed legislation to expand and enhance examination, education, and experience requirements for certified public accountants.
- Made California the first state in the nation to have a majority of public members on the Board of Accountancy.
- Strengthened state accounting laws, including requiring reporting of civil judgements, as well as settlements and arbitration awards of $30,000 or more.
- Prohibited accounting firm employees from working for a client within 12 months of providing audit services to that client.
- Appointed Gail Hillebrand, a pro-consumer attorney from Consumers Union, to the Board of Accountancy.