Like Stewart, some of the biggest names in the current wave of corporate criminal cases are company founders – Kenneth Lay of Enron, Bernie Ebbers of WorldCom, and John Rigas of Adelphia Communications. Steve Madden, founder of the shoe company that bears his name, is serving time, as is Sam Waksal, founder of Imclone Systems, the biotech company at the root of Stewart’s recent conviction. Calisto Tanzi, founder of the now bankrupt Parmalat dairy company in Parma, Italy, is under investigation for a decade of alleged fraud.
To be sure, hired managers such as former Tyco CEO Dennis Kozlowski, who is awaiting a retrial on fraud charges, and former investment banker Frank Quattrone, convicted in May of obstructing a federal investigation into stock allocation, have found themselves in trouble, too.
While most founders are never even summoned to court, they have a deep connection to their companies, making those firms especially vulnerable if their founders turn out to be felons, according to Wharton faculty and other experts. “What’s critically important for founders is their commitment to ethics at all levels,” says Maurice Schweitzer, professor of operations and information management. “How do they fill out expense reports? Do they ask employees to [perform personal errands] for them? Do they misappropriate funds while throwing a lavish party for their spouse? That sends a signal to employees about the corporate culture and what is allowed.”
Since many founders spend the early years of their careers struggling to build their businesses, few have the kind of ethics training that is now a part of most professional managers’ corporate upbringing, Schweitzer points out.
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