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10/26/2003

Ethics still nebulous despite scandals

By Tony Kindelspire
The Daily Times-Call

BOULDER — What’s the status of business ethics, after the debacles at Enron and WorldCom?

What led certain executives to think they could get away with any of the alleged corporate fraud and mismanagement that cost investors millions?

And has the overall ethical climate improved, or are the evildoers just laying low until the smoke clears?

“I think we’re the same humans we always were,” said Michael Leeds, the former president and CEO of CMP Media and the chairman of the Leeds Business Advisory Council. “I don’t think there were that many more things going on the last few years than there were before.”

Leeds, whose family’s endowment led to the University of Colorado naming its business school the Leeds School of Business, was one of the panelists featured in a discussion last week that was part of a daylong symposium on religion and morality in business.

The panel Leeds was part of featured a spirited debate on the state of ethics in business.

“I think what we don’t talk about enough is just plain greed — the numbers just got way out of hand,” Leeds said. “There’s no one that needs more than $100 million in their life to live on.”

Chuckling at Leeds’ comment, Stuart Campbell, a managing partner for service development at accounting giant KPMG, said the reason the dollar amounts became so big was that CEO compensation began to be linked to a company’s stock performance.

General Electric has 230,000 employees, Campbell pointed out.

“Is one CEO worth 2 percent of the equity of the entire corporation?” he said, referring to the compensation given to former CEO Jack Welch.

Leeds commented that he thought last summer’s televised images of various top executives doing their respective “perp walks” — being led away in handcuffs — “creates an environment where (executives) will think twice.”

“I don’t think it’s working,” said Will Weinstein, a financial adviser and the chairman of WIG LP. “Overpriced stock options are like managerial heroin.

“Anybody heard anything about Ken Lay lately? I don’t know what he’s been doing, but as far as I know he’s not under indictment.”

The panelists agreed that top executives ultimately should be held responsible for wrongdoing at their company but didn’t necessarily agree on what that would mean.

The Securities and Exchange Commission cannot bring criminal charges — only civil.

If a company that made billions last year has to pay a fine of a few million, where’s the incentive to behave ethically?

“I think we have to set laws and give the power to the SEC to not only prosecute but convict,” said Seth Tobias, the founder of Circle T Partners, an equity investment firm. “I think when you see WorldCom’s Bernie Ebbers being prosecuted by the state of Oklahoma (rather than the federal government), it’s a travesty.”

The panelists had their disagreements on the depth of the corporate ethics problem.

Tobias, for one, said that “a few bad apples” simply attracted a lot of attention and that most companies are run by “good people.”

“By and large, corporate America is self-policing,” he said.

But another panelist said he thinks the problem with Enron and companies like it doesn’t just cast a reflection on a handful of greedy executives, but on American society as a whole.

The popularity of Fox Television’s “Joe Millionaire,” Weinstein said, should provide a clue.

“The most popular show on television is based on a lie,” he said. “That’s what we live with every day. That’s our standard.”

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.