When Blue Chips Go Bad, We All Pay the Price
When happenings on the business pages of newspapers become indistinguishable from the crime news, the cost of our freewheeling free market no longer seems so “free,” does it?
Enron is the latest and most spectacular case. Here we have all the classic elements of a crime story, only more so: tragic victims, suspected villains, greed, investigations and the neighbors saying, “I don’t understand how this could happen.” There are many such stories from the boardrooms, a seemingly endless stream of them.
I’m not referring to the everyday accounts of shady telemarketers and too-good-to-be-true con men, from whom we expect the worst. No, these are brand-name companies that have shamed themselves: car companies, tire companies, auction houses, airlines, health care providers, brokerages, technology giants, big-time accounting firms--the Blue Chip crowd gone bad.
Here’s just a sampler from this year’s news:
“Millions of investors in recent years have watched their fortunes evaporate as a result of corporations playing tricks with their books.” --Associated Press.
“The SEC is conducting about 260 accounting fraud investigations, about 2-1/2 times the number of such cases that were filed last year.” --Los Angeles Times.
“U.S. highway safety officials have linked the faulty tires on Explorers to 271 traffic deaths and more than 700 injuries.” --Bloomberg News.
And matters are far worse than this. I regret to denigrate the men and women in what remains of our regulatory system, but really, who among us has faith in them anymore? For every wayward wheeler-dealer who gets snagged, how many other sharks, big and little, swim freely through the tattered net of laws and ethics that is supposed to protect us all.
The affronts would fill pages: sweetheart deals between boards of directors and company executives. Blatant conflicts of interests by Wall Street analysts. Kickbacks and favoritism in stock offerings. Foot-dragging on defective products. Offshore subsidies that provide tax havens. Accounting tricks and fraud to inflate company earnings. Do we have to sit still just because “everybody does it now”? Must we accept the corporate logic that damage suits from injured customers and regulatory fines are a “cost of doing business”?
I’m on the side of the hard hats at Enron’s subsidiary, Portland General Electric. They want somebody punished for what’s happened and tougher laws against corporate buccaneers. And so do I. If any of half a dozen things we’ve read about this rapacious company are true, it will be a scandal that cannot be allowed to stand, even if the top dog happens to be a back-slapping fat-cat pal of the president.
If it’s not a felony for executives to cash out their millions before their failures are revealed and then block employees from salvaging their 401(k) plans afterward, it ought to be.
Imagine the fuss if the Bloods or the Crips, instead of MBAs, had made themselves rich and left thousands of working people with bankrupt retirement accounts. Wherever you want to draw the line on the free market, surely it must be on the right side of that. Remember, we are speaking of “public” corporations.
What to do about renegade businesses? Well, we can hope that sooner or later the political system will make a correction; it always has. But it won’t happen fast enough as long as we remain divided, people versus corporations--or, as the political system sees it, voters versus contributors.
What working people need are allies. Frankly, I’m surprised that level-headed CEOs in sound, ethical companies haven’t raised a bigger stink. We need them in the forefront of a “better business” campaign to clean up this enemy within and to rewrite the basics of corporate charter authorizations to include public responsibility as well as fiduciary responsibility.
It’s the names of these good companies that are sinking in esteem, and their good work that is being besmirched. It’s their profit margins that look weak compared with those companies that will do anything to keep theirs pumped up. And, yes, they know how to keep business flourishing without undermining the society that depends on them, which is how free markets should work.
