From: Joe Berns [mailto:j_berns@hotmail.com]
Sent: Sunday, July 07, 2002 2:36 AM
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Subject: Corporate Corruption (s7-24-02)

I am not a CEO, MBA, or CPA. I am an individual investor that attempts to 
perform my due diligence as part of the process of making my investing 
decisions. It is clear to me that the current outbreak of corporate 
corruption and “cooked” financial statements are a threat to the viability 
of our stock markets, our publicly traded corporations, and possibly our 
political institutions. Although the rule changes being proposed by the SEC 
and the proposed legislation proceeding through the House and Senate 
(including the Sarbanes bill) are small steps in the right direction, they 
are insufficient to correct the types of major corruption that have been 
occurring.

Here are some suggested auditing proposals that should be considered for all 
publicly traded corporations (not just corporations over $1 billion):

1)	Until further notice, all publicly filed financial statements should have 
two separate audits, by two independent auditing firms. Two auditing firms 
should be harder to corrupt than one.
2)	Corporations should be required to change their auditing firms every 
year. In other words, you cannot use the same auditing firm for more than 
one year in row. This proposal could be used as an alternative to proposal 
1, but it would be preferable (in my opinion) to use it in addition to 
proposal 1.
3)	Do not let executive management pick the auditing firm. Alternative 
possibilities to audit firm selection by executive management could include 
the board of directors (or the auditing committee on the board), the 
management of the stock exchanges that the corporations trades on, or the 
SEC. A fair process could be established for selecting the auditing firms to 
perform the audits and formulas could be developed for calculating the 
auditing fees, based on the size of the audit (or the size of the 
corporation being audited).
4)	Auditing firms answer and report to the board directors first (not 
executive management).
5)	The CEO, CFO, and chairman of the board, should sign the publicly filed 
financial statements of their corporation, vouching for the honesty and 
integrity of the financial statements, at their risk of criminal penalties.

Here are some additional suggestions relating to governance of and by the 
corporate board of directors. Most of these suggestions are based on 
recommendations currently being made by the major stock exchanges:

1)	An independent director is a director that has not previously worked for 
the company, has no material relationship with the company (customer, 
supplier, etc.), and receives no pay from the company other than director’s 
fees.
2)	Independent directors must comprise a majority of the board.
3)	A CPA must head the board’s auditing committee.
4)	Limit the number of boards of publicly traded corporations (possibly to 
one) that a director can serve. I would rather have a director serve on one 
board well, as opposed to being a rubber stamp and serving many boards 
poorly.
5)	Any waiver of corporate conflict of interest rules must be approved by a 
majority vote of the stockholders.
6)	Compensation packages for executive management should require approval by 
a majority of the stockholders.
7)	Stocks options must be reported on financial statements as expenses to 
the corporation.

Thank you for your consideration.

Respectfully yours,
Mr. J. S. Berns
2005 Canary Island Ct.
Santa Clara, CA 95050