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As prepared for delivery...
Ambassador Klosson's Welcoming Remarks at CyABA's Corporate Governance Seminar
Nicosia Hilton
March 27, 2003, 16:00-19:30
Mr. Rologis, Mr. Kokkinos, Dr. Clerides, dear CyABA members, Ladies and Gentlemen:
I welcome this opportunity to participate in another CyABA sponsored event and thereby continue the Embassy's strong support for your work. As I noted last October, you provide a focal point for strengthening economic ties between the United States and Cyprus. Those ties took a step forward last week with the delivery of another Boeing 737-800 aircraft to EuroCypria. I have to say it’s great to have Boeings back in town.
Today’s initiative, however, is less about our bilateral business relations, although it is equally important. I congratulate your initiative to organize this seminar. In so doing, CyABA, and its parent organization KEVE, demonstrate their commitment to promoting sound corporate practices. Responsible corporate conduct has become the new watchword for businesses worldwide. It was the buzz during my recent assignment to Hong Kong. Excellence in this field will put aspiring business platforms well ahead of the pack in attracting foreign investment.
The Enron scandal in the United States, a little over a year ago, helped bring this issue to the fore in my country. It is, however, a global concern, as any perusal of recent business media will illustrate. No country or business is immune. This is a common problem that calls for our collective attention.
At the same time, it is clear that good corporate governance is critical for maintaining investor confidence in any economy. Although it does not appear on a company’s balance sheet, public trust is one of a company’s most important assets. CEOs must make it their top priority to ensure integrity in their operations. The role and responsibility of accountants in ensuring true transparency is key. The current return towards more “traditional values” in business is motivated, in large part by corporate self-interest: this is not just the “right” thing to do; ultimately, it is also the profitable thing to do.
The United States Government, for its part, is determined to crack down on corporate fraud. Last year, shortly after the Enron scandal, President Bush announced a Ten-Point Plan to Improve Corporate Responsibility and Protect America's Shareholders. The plan is based on three core principles: information accuracy and accessibility, management accountability, and auditor independence.
The US Government has taken additional measures to restore economic confidence and tackle corporate fraud. In July 2002, President Bush signed into law the bipartisan Oxley-Sarbanes corporate accountability legislation. This law will expose and punish acts of corruption, restore confidence in corporate America, and protect small investors. The law gives federal officials new abilities to crack down on fraud and wrongdoing and provides for tough oversight of the accounting industry.
More recently, in January 2003, President Bush announced major increases in funding to ensure that resources are available to crack down on corporate fraud and to implement important corporate accountability reforms. The increased funding is earmarked for three agencies:
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$842 million for the Securities and Exchange Commission -- the largest budget increase in the SEC’s history -- to enable the agency to hire new accountants, lawyers, and examiners to protect investors, combat corporate wrongdoing, and upgrade information technology systems.
These measures taken by the US Government, although tailored for US needs, show just how much governments can do to tackle the problem of corporate fraud.
One thing is clear: this must be a cooperative effort. Governments can only do so much to supervise corporate conduct. Corporations must also be committed to maintaining high standards for themselves. They must police themselves in order to maintain the public's trust. If they fail in this responsibility, they will lose the confidence of their investors. This public trust is precious. Once lost, it is hard to regain. Yet the small cost of maintaining that trust will pay far greater dividends for business, for shareholders and for society.
The relevance of this discussion for Cyprus is self-evident. As it prepares for EU accession, Cyprus has everything to gain by setting for itself the highest standards for corporate integrity and accountability. In this day of globalization, capital will flow into those countries with high standards that protect investor confidence. It will flow out even more swiftly if that confidence is shaken, as the Asian financial crises vividly illustrated.
This very simple rule of thumb – transparency – becomes a very powerful tool in attracting foreign capital. When applied to various aspects of an economy – from government tendering, to intellectual property rights protection; from securities oversight to prudential insurance regulation – transparency becomes a springboard for the development of any economy.
With these few thoughts, let me turn the floor over to the experts who can best help you fulfill your role in ensuring the highest standards of corporate responsibility. I wish you a productive seminar -- thank you very much.
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