Ethics in a culture of greed

As the days of summer shorten, and America's annual frolicking at the beach, the pool, or lakeside draws to an end, towns and hamlets across the land are preparing to commemorate the somber anniversary of Sept. 11.

From Texas to New England, and in cities like New York where the "We shall never forget you" banners remain alongside ground zero, plans are under way for vigils and memorial services and marches to honor the heroes of a year that has transformed society.

There are heroes aplenty in this year that has tested American mettle, made us more vigilant, produced an outpouring of patriotic fervor, and an appreciation for the freedoms under attack by terrorists.

Topping the list are firemen and policemen and ordinary citizens who helped save others, and sometimes sacrificed their lives in that effort. There are the passengers on a hijacked airliner over Pennsylvania who gave their lives rather than see their plane crash into the nation's capital. And the thousands of soldiers sent to root out the Taliban and Al Qaeda from the dangerous caves of Afghanistan.

Sadly, and in stark contrast, there were the non-heroes of the year, the boardroom bandits, the conscienceless corporate gunslingers who, while other Americans were engaged in noble and selfless deeds, were inflating their profits, looting their companies, defrauding their stockholders, and wiping out the savings of thousands of Americans.

Fortunately, their numbers to date are few, but their crimes are, in their way, no less threatening to the American economy and way of life than the actions of the terrorists.

The names of Enron and WorldCom and Adelphia and others will live in infamy as companies that sent the stock market spinning and shattered the faith of decent Americans.

Remedies are under way. We see CEOs escorted off in handcuffs to face prosecutors and judges. Jail may loom for white-collar workers, and should, for crimes of theft that would put blue-collar workers behind bars. As the Wall Street Journal put it editorially:

"Honest business people want genuine fraud to be prosecuted because they know markets work on trust."

Congress, moving with unusual alacrity in the face of the stock market's decline, last week approved sweeping reform legislation that should crack down sharply on corporate abuses. To monitor accounting practices more closely, an oversight board with disciplinary authority comes into being, itself under the aegis of the Securities and Exchange Commission. There are tougher jail terms for securities fraud. Destruction of records needed in federal investigations becomes a crime punishable by up to 20 years' imprisonment. Executives must assume greater responsibility for the accuracy of financial reports. There are new prohibitions on company loans to executives, and executive sales of company stock.

There is increased funding for the SEC, designed to increase its effectiveness since, under its embattled chairman Harvey Pitt, it has been criticized for laggard enforcement of existing rules.

President Bush, although traditionally wary of legislation restricting business, has strongly endorsed the new measures, declaring: "This government will investigate, will arrest, and will prosecute corporate executives who break the law."

This is part of a necessary campaign to shore up public confidence by a president acutely aware that his father, after widespread national acclaim for his successful conduct of the Gulf War, lost reelection to the presidency for his stewardship of the economy.

Actually, the economy is currently sound, stable, and growing, although the stock market has not reflected that. The economy has survived the get-rich-quick dotcom bubble, fueled by greed for unrealistic stock options and inflated capital gains. It is surviving the great telecoms crash.

Capitalism in the US is correcting itself, and is far from being in a state of collapse.

Some companies, like Coca-Cola, are doing what ethical companies should – declaring stock options as expenses.

New rules and regulations are necessary to force the compliance of executives who are unethical and who set an unethical tone for their companies. But a healthy society requires executives to do not only what is legal, but what is right and honorable.

Friends who teach in the business schools tell me there is a new emphasis on ethics, and how to maintain them not only in the graduate classrooms, but in the real world awaiting. An extremely successful businessman once posited to me: "How many more steaks can you eat after you've made your first million?" For every dishonest executive there are hundreds for whom ethics do not have to be thrust aside in a culture of greed.

• John Hughes, a former editor of the Monitor, is editor and chief operating officer of the Deseret News.