Issues related to insider corporate loan abuses were examined by PSI in connection with its ongoing investigation of Enron. Similar abuses by corporate executives, giving company-financed loans for millions of dollars, have taken place at other U.S. publicly traded companies.
"Studies show that corporate executive compensation continues to grow at an extraordinary rate, said Senator Collins. "Corporate executives are the last people who need below market loans and their companies, especially those such as WorldCom and Enron, are the last entities that ought to be making them. Recently passed legislation prohibiting corporate loans to executives and board members, therefore, should be enforced as rigorously as possible if we are to realize the legislation's intent to restore faith in corporate integrity." The extent of insider abuse lead the Subcommittee to recommend in its July report that board members of publicly traded companies bar the issuance of company-financed loans to company directors and senior officers.
Media reports indicate some companies may be pressing the SEC to narrow the scope of the prohibition or weaken it. These reports suggest opponents want exemptions for company loans used by executives to purchase company stock, exercise stock options, obtain insurance, relocate for work, or pay taxes.
"The prohibition makes it clear that publicly traded companies are not supposed to be using company funds to provide personal financing to company directors or officers for any reason; financing is to be provided instead by lenders, credit card operators, and other third parties engaged in the ordinary course of business."