Frank Offers Compromise to Business

Rep. Barney Frank (D-Mass.) yesterday held out an olive branch to business interests, announcing that he would be open to cooperating on trade, immigration and outsourcing if industry gave ground on union drives, health-care reforms and minimum-wage proposals.

At a briefing to introduce his legislative agenda, Frank, the incoming chairman of the House Financial Services Committee, addressed several hot-button issues, including a mounting push by business interests to slash what they consider burdensome regulations.

The lawmaker said he had met with leaders of the Securities and Exchange Commission and an accounting industry oversight board to urge them to give businesses some relief from a costly audit rule prescribed by the 2002 Sarbanes-Oxley law. Over the next two weeks, the agencies are set to present proposed changes to the rule, which requires that auditors review corporate financial controls to prevent fraud and mistakes.

"There's a general consensus that you can preserve principles of Sarbanes-Oxley without exempting anybody and make it less burdensome," Frank said.

Frank also vowed to hold hearings on a report issued last week by the Committee on Capital Markets Regulation, a private group that has won support from Treasury Secretary Henry M. Paulson Jr.

He reserved judgment on proposals that would make it more difficult for consumers to sue businesses, auditors and corporate board members, saying that the issue fell under the jurisdiction of another congressional panel.

But Frank said he agreed with several other recommendations, including indicting companies only as a last resort and rolling back controversial Justice Department guidelines that urge companies to waive their attorney-client privilege.

Deputy Attorney General Paul J. McNulty has been considering changes to a memo that says when prosecutors should bring criminal charges against businesses, but he has not released any revisions. In the meantime, Senate Judiciary Committee Chairman Arlen Specter (R-Pa.) is set to introduce legislation to supersede those guidelines as early as today.

In contrast to his conciliatory tone on those issues, Frank decried the widening inequality of incomes as the "number one problem facing the U.S. domestically" and pledged to hold hearings early next year on soaring executive compensation.

A bill Frank had introduced promoting greater disclosure of executive pay packages will come up again, he said, because few members of corporate boards protest excessive pay demands by chief executives.

Frank expressed general agreement with proposals that would give shareholders more say in the way businesses operate, calling that approach a worthy alternative to regulation.

The SEC is weighing how much power to allow shareholders to nominate and reject candidates for corporate board membership. Business groups argue that granting such power to shareholders could allow special interests such as union-backed pension funds to hijack corporate agendas. Amid threats from industry representatives who said they would sue over the measure, the SEC yesterday postponed consideration of the issue, removing it from the topics it will consider at its Dec. 13 meeting.

Frank expressed less confidence in arguments that U.S. rules are forcing companies to move abroad and hurting American competitiveness. He said similar doomsday arguments were made by technology firms that bitterly opposed treating stock options as an expense on their books.

He rejected the prospect of legislation to tighten oversight of hedge funds, lightly regulated pools of capital designed for wealthy investors and institutions. But Frank said not enough is known about the more than 9,000 hedge funds and their risks, so hearings with no "predisposition to regulation one way or another" are likely, particularly examining instances in which public employee pension funds have invested with hedge fund managers.