Jeb Hensarling

Mr. HENSARLING

Mr. HENSARLING. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, I rise today in support of H.R. 3326, the World Bank Accountability Act. Frankly, I don't quite understand why every Member is not rising in support of H.R. 3326. This is important legislation, which is sponsored by my friend from Kentucky (Mr. Barr), the chairman of the Monetary Policy and Trade Subcommittee. It was cosponsored by a senior Democrat on our committee, the gentleman from California (Mr. Sherman). Mr. Chairman, it passed our committee by a unanimous vote 60-0. Again, Mr. Chairman, this measure passed our committee by a unanimous vote of 60-0. H.R. 3326 makes a share of future World Bank appropriations contingent upon vitally needed reforms, with focus on the World Bank's International Development Association, known as IDA, which is the World Bank's concessional lending window, dedicated to 75 of the world's poorest countries. Mr. Chairman, the reforms in this bill have emerged from five different oversight hearings held in our committee over the past 2 years and they all enjoy bipartisan support. The bill also supports the administration's goal of ensuring that the World Bank's work is consistent with U.S. priorities that are, obviously, financed by the U.S. taxpayer. In the President's FY 2018 budget, the administration called for a holding to account international organizations whose missions don't advance U.S. foreign policy's interest or which haven't been well managed. H.R. 3326 would enact the administration's request for a 15 percent reduction on authorized funds for IDA. In addition, Mr. Barr's legislation contains crucial national security provisions, including a prohibition on World Bank assistance to countries that knowingly violate U.N. Security Council sanctions on North Korea. Also, safeguarding our national security is a provision that helps ensure World Bank assistance won't be used for state sponsors of terrorism. Mr. Chairman, this is a commonsense requirement that benefited from the input of our democratic colleague on the committee: again, Mr. Sherman from California. So, again, Mr. Chairman, it does kind of beg the questions: Why are we here today? Why are we debating a bill that received support from every single Republican and Democrat on the committee? As some who may be viewing our proceedings know, there is such a thing known as a suspension calendar for relatively noncontroversial items. This bill should have been dispensed with on what is known as a suspension calendar since it passed our committee 60-0. But now, apparently, the ranking member has had a change of heart on opposing a bill that she voted for on committee. So some may be confused, and indeed we are confused. It is interesting that we now see opposition to linking these IDA payments to reforms, but that is exactly what Democrats on the Financial Services Committee did in 2005. It is exactly what they did when they voted to withhold 25 percent of IDA funds in a foreign operation's appropriations bill. Last July, the ranking member, the gentlewoman from California (Ms. Maxine Waters), consistent with her earlier vote, voted in support of H.R. 3326 as well. So, again, some of us are confused as to why it is being opposed now if she has voted for the policy of withholding twice, including voting for the very bill we are debating today. It is also important to note, Mr. Chairman, that the reforms included in this bill are those that the World Bank itself deems are important. As far back as 1992, a bank management review highlighted its perverse staff incentives that made pushing money out the door more important than making a dent in global poverty. And as recently as 2014, a bank evaluation report confirmed that these very same perverse incentives are still in place. Then there is the notorious case of mismanagement in the Uganda Transport Sector Development Project: a scandalous bank initiative, where basic lack of project oversight led to sexual exploitation of underage girls, repeated harassment of female staff, and deficient safety measures that very well may have resulted in five fatalities-- lest we forget. In 2015, the World Bank's president had this to say: The multiple failures we have seen in this project on the part of the World Bank, the government of Uganda, and a government contractor are unacceptable. It is our obligation to properly supervise all investment projects to ensure that the poor and vulnerable are protected in our work. In this case, we did not. I am committed to making sure that we do everything in our power, working with other stakeholders first, to fully review the circumstance of this project, and then to quickly learn from our, and other's, failures so they do not happen again. Mr. Chairman, if the World Bank thinks these reforms are necessary, shouldn't we all think these reforms are necessary? And how about the testimony of Sasha Chavkin, a reporter for the International Consortium of Investigative Journalists, who testified before our committee? Sasha said: We found that, over a decade, spanning from 2004 to 2013, projects financed by the World Bank physically or economically displaced an estimated 3.4 million people around the world. Mr. Chairman, these are some of the world's most vulnerable displaced by the World Bank that screams out for more reforms. Mr. Chairman, I thank Mr. Barr for saying with his legislation that enough is enough. He has produced a serious, long overdue reform bill, one that was supported in our committee unanimously 60-0. We typically could not get a 60-0 vote on a Mother's Day resolution, yet we have it for this bill. Again, it just begs credibility and credulity as to why are we here today debating a bill that was passed unanimously in committee. I urge the House to adopt it unanimously. Mr. Chairman, I reserve the balance of my time.

Mr. HENSARLING. Mr. Chairman, I yield myself 10 seconds again to say it is an interesting narrative being told by the minority, but they offered no amendments, voted for the bill 60-0. We have heard nothing for 6 months until last Friday, the first time they decided to articulate a specific concern about a bill they had already supported. Mr. Chairman, I yield 4 minutes to the gentleman from Arkansas (Mr. Hill), the majority whip of the Financial Services Committee.

Mr. HENSARLING. Mr. Chair, I yield myself the balance of my time. First, Mr. Chairman, let me get the whole process debate out of the way. Anybody who is watching this debate has got to be scratching their head at the proposition that every single one of my Democratic colleagues who come to the floor to denounce H.R. 3326 have already voted for it. They voted for it 60-0 in committee. Mr. Chairman, do you know how many amendments they offered in that markup, their opportunity to refine the legislation, their opportunity to improve the legislation, their opportunity to put their imprimatur on the legislation? Do you know how many amendments they offered? Zero. Zero amendments were offered by the minority who now claim that somehow they were cut out of the process. For 6 months, we have been waiting, waiting to bring this bill, waiting to hear about these improvements, and only three legislative days ago did, finally, the Democrats deign to offer any new improvement to this bill. So I think, Mr. Chairman, she doth protest too much. And now what I don't understand, Mr. Chairman, is how my Democratic colleagues can defend some of these rogue regimes and some of the activities of the World Bank. Dr. Jean Ensminger, Edie and Lew Wasserman professor of social science at Caltech, testified that there is corruption throughout World Bank projects in remote areas of Kenya near the Somali border. She said: ``As I dug more deeply, it became apparent that corruption had been entrenched in the project since 2000.'' And we are talking about the poorest of the poor. She goes on to say: As the board was about to renew the project for 5 years, finally, the internal investigation showed that 62 percent of the transactions were fraudulent. Except my friends on the other side of the aisle: It doesn't matter. Don't worry about the fraud. Just send them U.S. taxpayer money. It doesn't matter that the poor aren't actually helped. Just send them money because it makes us feel good. Sasha Chavkin from the International Consortium of Investigative Journalists testified--and I alluded to this earlier about the forced displacement of the poorest of the poor caused by projects financed by the World Bank. He went on to testify: ``We found, instead, that the bank repeatedly funded governments that not only failed to adequately resettle communities, but, in some cases, were accused of human rights abuses such as rape, murder, and violent evictions associated with bank projects. We found in several cases that the World Bank continued to bankroll these borrowers even after evidence of these abuses came to light.'' We have a bill to reform that, to make sure the poor are actually helped, to ensure that instead of taxpayer money going to rape, murder, and violent evictions, that it actually goes to help the poor. And why my Democratic colleagues who were once for it are now against it is beyond me. We certainly know about the infamous World Bank project, road project, in western Uganda where it was associated with an increase in sexual exploitation of young girls. Teenage girls were being sexually harassed on the way to school. Many were sexually exploited or wagged by project workers, and once this became known, the World Bank denied it. So we have the simple bill to say that the U.S. taxpayer will demand accountability. We will demand reforms. People should be aghast at how this money has been spent at the World Bank. It is not how much money you spend. It is how you spend the money. And if we want reforms, we are going to have some accountability, something that my friends on the other side of the aisle used to support, and they should be ashamed that they are not supporting it today. We must all support H.R. 3326. I very much commend the gentleman from Kentucky for bringing this valuable piece of legislation to the floor. Mr. Chairman, I urge its adoption, and I yield back the balance of my time.

Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and to submit extraneous material on the bill under consideration.

Mr. HENSARLING. Mr. Chairman, I yield 4 minutes to the gentleman from Ohio (Mr. Davidson), another hardworking member of the Financial Services Committee who knows this bill passed 60-0 with no Democratic amendments offered.

Mr. HENSARLING. Mr. Chairman, I yield myself 10 seconds just to say when my colleague on the other side of the aisle talks about meaningful participation, not one single amendment was offered by my Democratic friends. It was a perfect bill. It passed 60-0. I would also point out the only leverage we have as the United States is our contribution, and that is what this bill does. Mr. Chairman, I yield 4 minutes to the gentleman from Michigan (Mr. Huizenga), the chairman of the Financial Services Subcommittee on Capital Markets, Securities, and Investments.

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, I listened carefully. I didn't hear anything about labor union political campaign contributions, known political allies of the Democratic Party. This is yet one more assault on the First Amendment's freedom of speech by my friends on the other side of the aisle. Mr. Speaker, it ought to be rejected, and I yield back the balance of my time.

Mr. HENSARLING. Mr. Speaker, may I inquire how much time I have remaining?

Mr. HENSARLING. Mr. Speaker, I yield myself the balance of my time. Mr. Speaker, while I was fascinated to hear so many of my friends on the other side of the aisle exclaim how much they care about working Americans, it just makes we wonder why now twice--twice--in the last 24 hours they have voted against giving the average working American a $2,059 tax cut. Twice now they have voted to deny working Americans tax relief in order to bolster their paychecks. I wonder about that. I also wonder, as I listened to this litany of groups whose letters were entered into the Record, how often I heard labor union; government pension; Washington, D.C.; and special interest group. What I didn't hear about is average working Americans who have their investment in trying to save to buy a home, trying to perhaps fund a small business, or send a kid to college. It is their interest that we are trying to stand up for. So what we know is that the SEC--the Securities and Exchange Commission--have, for all intents and purposes, required investment advisers to use one of two proxy advisory firms, one of which, as my colleague, the author of the bill pointed out, is owned by a foreign labor union. Yet the SEC requires us to use them. So here is the radical nature of the bill: the bill, H.R. 4015, simply says that we ought to have transparency--something apparently my friends across the other side of the aisle are against. We say they have to register with the SEC--something my friends on the other side of the aisle are against. They have to disclose potential conflicts of interest. Apparently my friends on the other side are against that. They have to disclose codes of ethics. Apparently my friends on the other side of the aisle are against that, as well as making their methodologies public. This is a disclosure bill to help investors, pure and simple. We ought to vote in favor of H.R. 4015. Mr. Speaker, I yield back the balance of my time.

Mr. HENSARLING. Mr. Speaker, I claim the time in opposition.

Mr. HENSARLING. Mr. Speaker, I yield an additional 1 minute to the gentleman from Wisconsin.

Mr. HENSARLING. Mr. Speaker, I yield an additional 1 minute to the gentleman from Wisconsin.

Mr. HENSARLING. Mr. Speaker, I reserve the balance of my time.

Mr. HENSARLING. Mr. Speaker, I yield 4 minutes to the gentleman from North Carolina (Mr. Budd).

Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say that, if the gentleman is so busy he can't read a 100-page proxy statement, perhaps he could read a 20-page bill and he would realize that his comments have almost absolutely nothing to do with the bill whatsoever. Mr. Speaker, I yield 5 minutes to the gentleman from Wisconsin (Mr. Duffy), the sponsor of the legislation and the chairman of the Financial Services Subcommittee on Housing and Insurance.

Mr. HENSARLING. Mr. Speaker, I reserve the balance of my time.

Mr. HENSARLING. Mr. Speaker, I yield an additional 30 seconds to the gentleman from Arkansas.

Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days to revise and extend their remarks and submit extraneous material on the bill under consideration.

Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 657, I call up the bill (H.R. 4015) to improve the quality of proxy advisory firms for the protection of investors and the U.S. economy, and in the public interest, by fostering accountability, transparency, responsiveness, and competition in the proxy advisory firm industry, and ask for its immediate consideration in the House.

Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds. Mr. Speaker, it is a historic day in America. Republicans deliver historic tax relief for working Americans and small businesses. The ranking member has articulated concern over burdensome requirements. I look forward to working with her now on reducing the burdensome requirements of the Dodd-Frank Act. Mr. Speaker, I yield 4 minutes to the gentleman from Michigan (Mr. Huizenga), the chairman of the Committee on Financial Services' Subcommittee on Capital Markets, Securities, and Investments.

Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in strong support of H.R. 4015, the Corporate Governance Reform and Transparency Act of 2017, and I thank the sponsor of this legislation, the gentleman from Wisconsin (Mr. Duffy), the chairman of the Housing and Insurance Subcommittee of our committee, for offering this bill. Each year, Mr. Speaker, public companies hold shareholder meetings wherein shareholders vote for the companies' directors and on other significant corporate actions that require shareholder approval. Mr. Speaker, the Securities and Exchange Commission requires that, before these annual shareholder meetings take place, public companies must provide shareholders with proxy statements that include all important facts about matters to be voted on at a shareholder meeting. Many shareholders and investment advisers rely on information provided by proxy advisory firms to guide their votes on these matters. H.R. 4015 would enhance transparency in the shareholder proxy system by requiring proxy advisory firms to register with the SEC, disclose potential conflicts of interest and codes of ethics, and make their methodologies public. Mr. Speaker, this is a pure disclosure bill, nothing more, nothing less. Proxy firms play an outsized role in the U.S. economy in shaping corporate governance. They counsel pension plans, mutual funds, and other institutional investors about how to vote the shares of corporations that they own. With respect to institutional investors, Mr. Speaker, the share of institutional investor ownership was roughly 46 percent as recently as 1987, but today, that figure is more than 75 percent; in other words, the volume of proxy votes for which investors are responsible has grown into the billions. In 2003, the SEC adopted a rule under the Investment Advisers Act that requires an investment adviser to vote in the best interest of their clients' own proxies. A series of SEC no- action letters give the investment adviser a fundamental safe harbor from liability if they use a proxy adviser. As a result, institutional investors have increasingly relied on proxy advisory firms to help them decide how to vote their shares. However, regulators, market participants, and academic observers have highlighted potential conflicts of interest that are inherent in the business models and activities of proxy advisory firms. The committee, for example, is aware of numerous instances whereby the two largest proxy advisory firms have issued vote recommendations to shareholders that include errors, misstatements of facts, and incomplete analysis. For example, in one instance, a company reported that, even though the total shareholder return the company actually had generated for its shareholders was 64 percent, a proxy advisory firm, Glass Lewis, erroneously reported this calculation to be 26 percent. Another company reported that ISS erroneously reported that the company's long-term cash awards will vest and pay out their maximum opportunity in the event of a change in control. Well, this was reported even though the company's plan had been amended and approved by the shareholders years earlier in a manner that would pay out at target upon change in control, and there are many other examples. Some proxy advisory firms' recommendations have been made without any contact to the public company at all, and then these same proxy advisory firms encourage companies to join their service in order to have the privilege to ``influence'' an advisory firm's recommendations. I suspect, for many people, this simply does not pass the smell test. An industrial company told its shareholders, Mr. Speaker: ``ISS' negative recommendation was based on flawed analysis of our compensation programs that did not appropriately take into account the significant declines in our CEO's pay in 2015 or the performance-based nature of our annual and long-term incentive compensation programs.'' A pharmaceutical company responded to a proxy advisory firm's recommendations with this statement: ``For the second year in a row, Glass Lewis did not include its full pay for performance analysis in this report. For shareholders who rely only on Glass Lewis materials to make voting decisions, there is no discussion of the company's industry-leading performance over this time period.'' Again, Mr. Speaker, there are many, many more examples like these. So another concern that many people have, Mr. Speaker, is that the two largest proxy advisory firms collectively--collectively--make up 97 percent of the proxy advisory industry--97 percent. This monopolization and the lack of transparency regarding proxy advisory firms means that the writings, analysis, reports, and voting recommendations of these two firms have a disproportionate effect on fundamental corporate transactions like mergers or acquisitions, the approval of corporate directors, and shareholder proposals. In other words, these two firms have a huge impact on our economy. The bill of the gentleman from Wisconsin (Mr. Duffy) helps address these concerns by setting up a new regulatory regime for proxy advisory firms that looks out for the interest of investors, shareholders, by ensuring they receive complete information through the proxy process and can better vote in a manner consistent with shareholder interest as opposed to the potential conflicted interest of a proxy firm. Mr. Duffy's bill also helps ensure that shareholders and their proxies have access to accurate information regarding companies by allowing companies to provide input on proxy recommendations. This is especially important for emerging growth companies that rely heavily on investors. A bad proxy recommendation in which emerging growth companies cannot refute the recommendation can be devastating to those emerging growth companies and, thus, have a harmful impact on our economy. In a letter to our committee, the Biotechnology Innovation Organization wrote: ``Small business innovators operate in a unique industry that values a strong relationship with investors. Yet they are often held to standards that are not applicable to their company and forced to engage in proxy fights over issues that do not add value to shareholders.'' H.R. 4015 would provide for SEC oversight of proxy advisory firms, ensuring that they operate within appropriate boundaries and can be held accountable to regulators and the public. To be clear, Mr. Speaker, nothing in this bill permits companies to rewrite a proxy firm's report or forces a proxy firm to change its recommendation based on feedback received from the company. In summary, H.R. 4015 will improve transparency in the proxy system and enhance shareholder access to information by ensuring that proxy advisory firms are registered with the SEC, disclose potential conflicts of interest and codes of ethics, and make publicly available their methodologies for forming proxy recommendations and analysis. For every Member who believes in investor protection and supports a healthier economy, they should support H.R. 4015. Mr. Speaker, I reserve the balance of my time.

Mr. HENSARLING. Mr. Speaker, I yield an additional 1 minute to the gentleman from Michigan (Mr. Huizenga).

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from Arkansas (Mr. Hill), our Republican Conference whip.

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, on that I demand the yeas and nays.

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, on that I demand the yeas and nays.