PRN: Corporate Scoundrels Mucking Matters

It's time to go on a rant. Wall Street'sboom and inevitable bust of the past20 years has been abetted and cappedby the shadow of malfeasance from alltoo many corporate VIPs, even MarthaStewart. We, the investing public, havebeen flimflammed, hoodwinked, andbamboozled too many times, and I willnaively state that we're not going totake it anymore! Well, maybe. But why,you say, does such smarmy behaviorcome from so many wealthy and capablepeople? Oh, let us count the ways.

Boom times tend to mask questionablepractices. Why look too closelywhen everyone is making money? Experiencetells us we must.

MISCREANT CONSEQUENCES

Who is going to do the looking?Investors are easy targets because weare as greedy as any, optimistic by definition, and rarely heed the too fewwarning signs we're able to detect. TheSEC is chronically underfunded, understaffed,and likely to stay that way aslong as congressional elections areheavily funded by the financial community.Let's add real campaign reform toour to-do list this year.

If corporate miscreants get caught,and historically few do—well after thefact—there are often unreliable andminor consequences. Even when casesare brought, they're almost always settled,not adjudicated. And the penaltiesusually amount to a fraction of the illicitgain, so where's the risk? MichaelMilken, for instance, paid a $600-millionfine after his conviction in the Drexeljunk-bond debacle. But when he got outof 2 years of playing tennis at LompocPrison, he returned to a $1-billion fortuneand a place on the Los Angeles Alistfor his "good works" with ourmoney. What about those of us leftholding the bag? Junk bonds, anyone?Don't we try to teach our kids theimportance of consequences? Whereare these family values in Washington?

If you haven't noticed, most of thedeals over corporate misbehavior thatare negotiated are done by the verytop execs who created the problems inthe first place, so part of the dealincludes the onus going to the corporateentity. This amounts to virtual personalimmunity, or at least zero jailtime, for many. All of this is facilitatedby expensive lawyers using still moreof our money not dedicated to increasingshareholder value.

FLAWED ALARM SYSTEM

Time and again the press has beenour best watchdog. But even when ascandal hits the front pages with muchfanfare, the spotlight always moves on,leaving the ever-patient, wealthy, allegedwrongdoers to continue thrivingin a still-flawed system.

Wall

Street Journal

Financial affairs are the lifeblood ofour culture. We must have absolutetrust that these activities are rigorouslyscrutinized and policed if we are tokeep on functioning successfully. The"knavery on a grand scale," as the recently called 2002's corporatescandals, must be vigorouslydealt with if we have any chance of protectingour future. Let's support anindependent, well-funded SEC with regulatoryteeth. Let's support personalresponsibility for executives and boardmembers rather than allowing a corporateshield when the law is broken,effecting the executives' personal financialimprovement and the investingpublic's impoverishment.

Jeff Brown, a partner on the

Stanford Graduate School of

Business Alumni Consulting

Team, teaches in the Stanford

School of Medicine Family

Practice Program. He welcomes questions

or comments at jeff ebrownmd@aol.com.