The high-profile corporate scandals involving former WorldCom CEO Bernie Ebbers and former Tyco CEO Dennis Kozlowski are back in the news, refocusing attention on corporate fraud and inviting such questions as: What, if anything, has changed since these allegations emerged a few years back? And will the criminal trials of these two men, under way this week, serve as a deterrent to other high-profile executives who might be tempted to forget the rules of fair play in corporate America?
Some observers caution that it’s a little early to determine whether the most recent round of corporate reform efforts -- primarily the Sarbanes-Oxley Act, passed by Congress in 2002 and designed to increase corporate transparency and safeguards for investors -- will have much impact on America’s executive suites and board rooms. Moreover, says Wharton legal studies professor Thomas Donaldson, there are limits to the compliance approach to ethics. “Corporate governance is a hot topic, but we are overly optimistic about what corporate governance can do.” Simply rearranging the chairs at the higher echelons of a company, he adds, will not prevent the types of fraud that have occurred over the past several years. Penn law school professor David Skeel agrees. “To the extent that we think we can head off the next round of scandals -- think that if we just get these cases right it won’t happen again -- we’re kidding ourselves.”
Cat-and-Mouse Games
Why the discouraging prognosis? A simple review of American history tells us that as long as there have been corporations, there have been corporate scandals. In his new book, Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From, Skeel traces the history of modern day corruption by citing such examples as financial genius Jay Cooke, who masterminded a new strategy for selling government debt during the Civil War, and Samuel Insull, who built a vast utilities empire only to be ruined by the Depression and later decried by Franklin D.
[continue]
Page 1 of 6
> >>