S. 305 provides one answer. The bill will make it a criminal offense for any corporate officer or employee of any corporation is the way the bill is written, as I understand it, to bribe a foreign government official to obtain business or to affect the outcome of legislation or regulation of that Government. These provisions are backed up by accounting provisions requiring the maintenance of internal accounting controls which will ensure the integrity of corporate records and which will fix the management responsibility to stop bribery squarely on the corporate board of directors. Last year this bill passed the Senate by a unanimous vote, 86 to nothing. Let's not kid ourselves. This bill is not home free. It was stopped last year in the House by the opposition of those objecting to the provisions of the bill. It will take strong support from the administration and those of us in Congress who believe in it to get the bill passed. The bill also contains an important title II, the disclosure of ownership of American companies. I join Senator Williams' floor statement on that part of the bill and I defer to my colleague from New Jersey on that part of the bill at this time. OPENING STATEMENT OF SENATOR WILLIAMS Senator WILLIAMS. Thank you. If I could add one point on title I, Mr. Chairman, it seems to me that title I of the bill is obviously the first step, but an essential one. An affirmative action by our Government will facilitate, what I believe is generally agreed is necessary, an international solution. Once the bill becomes law our Government will be in a position to argue forcefully, with integrity and credibility, for bilateral and multilateral agreements. Title II of the bill, The Domestic and Foreign Investment Improved Disclosure Act, takes a fresh approach to a long-standing problem: determining who owns and controls U.S. corporations. But interrelated developments point up the need for additional legislation in this area. The first is the dramatic growth in foreign investment in the United States in recent years. According to a recent Treasury Department study, foreign portfolio investment in the U.S. corporate stock is valued at $43.9 billion, with a marked increase occurring in recent years. A percentage of outstanding voting stock of the 200 large companies, foreign ownership averaged 4.1 percent. According to the Department of Treasury, the majority of this investment is held by banks, brokers and nominees. Under these circumstances, our monitoring capabilities must be improved to facilitate intelligent analysis of important regulatory and policy questions raised by a dramatic increase in foreign investment. Thus, title II would require reporting of additional information concerning the residence, nationality and nature of beneficial ownership. Title II is also directed specifically at the difficulty, in many cases the impossibility, of determining with precision the locus of control or influence, real and potential, over publicly owned corporations. Several authoritive studies done by Congress, by the Commission, and by others, have underscored the need for accurate disclosure and broad dissemination of corporate ownership information. Although such information has been required by Congress and mandated by the regulatory agencies for many years, it is not yet available. Part of the delay is caused by foot dragging by the regulatory agencies. The SEC is a case in point. Congress specifically authorized the Commission in the 1975 Act Amendments to require institutional investors to report periodically their portfolio holdings and transactions. It is almost two years later and the SEC has yet to implement the reporting requirements. In practice, disclosure under the securities laws is often less than full becaue large shareholders cannot be identified due to the use of street or nominee names. Advances in securities processing also compound the problem of determining corporate ownership. Efficient stock transfer practices require the use of street and nominee names. However, their use operates to impede the availability of accurate ownership information. Title II would attack this problem by enlisting the aid of record holders in securing public disclosure of essential and accurate ownership information. It would advance the public policy in favor of ascertaining corporate ownership, while at the same time maintaining respect for individual privacy and imposing only minimal compliance costs on intermediaries. And this would be accomplished without discouraging investment and participation in our securities markets. Both titles of this bill, Mr. Chairman, we know have been fully considered previously by this committee and passed by the Senate. Following these additional hearings, I am hopeful that these important amendments to our Federal securities laws can be approved by Congress and signed by the President. I'm pleased to join you in sponsoring both titles, Mr. Chairman. The CHAIRMAN. Thank you, Senator Williams. Senator Metcalf, I mentioned the other two distinguished witnesses that we have along with you this morning. We have others following, too, but there are three government witnesses, including you, and we are very honored and delighted to have you. You have one of the most refreshing and innovative approaches in this area of anyone I know and you have been very diligent and very helpful in discussing this. I'd like to say that I'm going to have to leave the committee for about 45 minutes or an hour because I have a hearing of the Intelligence Subcommittee of the Appropriations Committee that I have to attend, and Senator Williams will chair in my absence. I will be back. STATEMENT OF LEE METCALF, UNITED STATES SENATOR FROM THE STATE OF MONTANA Senator METCALF. Thank you very much, Mr. Chairman. I'm somewhat overwhelmed as the leadoff witness in such distinguished company and I appreciate your courtesy, Mr. Chairman, in allowing me to testify first. Mr. Chairman, I support S. 305. I want to talk about title II, the disclosure title. I shall suggest some changes which I believe would assure that the intent of title II and the securities laws is carried out. What we are dealing with in title II is part of the same problem which we have dealt with for several years in the corporate disclosure COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WILLIAM PROXMIRE, Wisconsin, Chairman JOHN SPARKMAN, Alabama HARRISON A. WILLIAMS, JR., New Jersey THOMAS J. MCINTYRE, New Hampshire EDWARD W. BROOKE, Massachusetts H. JOHN HEINZ III, Pennsylvania KENNETH A. MCLEAN, Staff Director JEREMIAH S. BUCKLEY, Minority Staff Director い (II) Lee Metcalf, U.S. Senator from the State of Montana....... ADDITIONAL STATEMENTS AND Data American Airlines, review of ownership information___. 6 175 180 Letter to Senator Proxmire from Wallace E. Olson, president---- 215 219 Statement before House Committee on Interstate and Foreign 224 Chamber of Commerce of the United States, statement of J. Jefferson 185 Civil Aeronautics Board, letter from John E. Robson, Chairman, regarding 29 Comptroller of the Currency, letter to Depository Trust Co., from Robert Corporate Data Exchange, Inc., letter to Senator Metcalf regarding American Airlines' largest stockvoter--. 28 37 26 Depositary Trust Co.: Exchange of letters with Civil Aeronautics Board regarding annual reports required of companies under regulation____ Letter to Senator Metcalf regarding the security position listing for Federal Deposit Insurance Corporation, letter from Robert E. Barnett, Federal Election Commission, relationship to the Congressional Research Federal Power Commission, letter to Depositary Trust Co. from L. H. Federal Reserve Board, letter to Depositary Trust Co., from Arthur F. Metcalf, Lee, U.S. Senator from the State of Montana : Exhibits accompanying prepared statement__ Reprint of remarks in the Congressional Record on the Federal Power Response to subsequent questions of Senator Williams. Model corporate disclosure regulations developed by the interagency steering committee on uniform corporate reporting, established by GAO____ Morgan Guaranty Trust Co.: Holdings of American Airlines' common stock__. Letter to Senator Metcalf enclosing list of the names of all nominees used for the registration of securities____ Report to the Civil Aeronautics Board regarding capital stocks held National Association of Manufacturers, letter and statement received from Price Waterhouse & Co., views on title I, sec. 102 concerning certain Beneficial ownership disclosure requirements, reprinted from Federal 133 Joint letter received from Senators Williams and Metcalf and Congressman Moss on regulatory delay of subsection 13 (f) of the Securities Exchange Act of 1934_. Letter to Depositary Trust Co. from Roderick M. Hills, chairman____ Treasury Department, letter from W. Michael Blumenthal, detailing members of United Nations Working Group on Corrupt Practices representing the U.S. Government___ 106 Wolfson, Nicholas, professor of law, Connecticut University, statement on title I, foreign corrupt practices__ 215 |