Soft on corporate crime

July 16, 2002|By Molly Ivins

AUSTIN, Texas - Well, President Bush made his big speech on corporate reform July 9 and the stock market went down by 178 points.

As predicted, Mr. Bush proposed stiffer penalties for bad apples, evildoers and perpetrators of "malfee-ance."

Unfortunately, that won't fix the system.

Much as one would like to see many corporate executives doing time alongside hard-working stick-up artists, that leaves the systemic problems in place.

Among the leading structural factors causing the cascading scandals are conflict of interest on the part of auditors who also get paid by their clients as consultants, conflict of interest on the part of stock analysts and their investment-banker bosses, abuse of stock options encouraged by not having to count their cost against earnings, and lack of oversight on accountants and insider loans - of the very kind Mr. Bush himself got at Harken. Mr. Bush addressed none of it.

Stiffer penalties for what is already illegal are not helpful when the problem is what is legal. Mr. Bush's effort to treat this as though it were simply a law 'n' order problem is not going to be effective.

Even the law 'n' order proposals are pretty pathetic. Mr. Bush wants the Securities and Exchange Commission to be able to punish corporate leaders "by banning them from ever serving as officers or directors of a public company." So if you rip off your shareholders, destroy your workers' pensions and bail out just before the crash, taking your golden parachute with you - we'll never let you do it again! That and 20 lashes with a wet noodle, and now we're talking deterrence.

The idea of setting up financial crimes SWAT teams would have more appeal if it wasn't effectively saying, "Don't worry about a thing - we're putting John Ashcroft in charge." Great, there won't be an uncovered breast to be found anywhere in corporate America.

Increasing the SEC's budget by $100 million sounds like a nice round number, but even the toothless House Republican bill includes almost three times that - $296 million. Given that the beleaguered agency is understaffed, underfinanced, outgunned and outmanned, we could consider spending more than the price of one of our bad helicopters on it.

SEC personnel notoriously make less than those at other government agencies. On top of that, they've got Harvey Pitt for a chairman. Although Mr. Bush said "self-regulation is not enough," he did not address the need to create a strong oversight board to audit the auditors.

Since the president proposes nothing to fix the problems - the speech was basically a cheap sop to our schadenfreude - we can look for the situation to continue to get worse. We are already seeing a major pullout from U.S. markets by foreign investors.

You may not recall this because the media were totally preoccupied with Monica Lewinsky at the time, but a few years ago, about one-third of the world's financial markets collapsed. A few citizens who were paying attention managed some thoughtful analysis of the problems, including the critical role of capital flight by foreign investors.

The United States got itself quite an obnoxious reputation at the time for giving condescending and unsound advice, most of it via the World Bank, to the afflicted countries. Time to dig out those old lectures we used to read to others and study them carefully for their errors. It's our turn in the tank.

Molly Ivins is a columnist for the Fort Worth Star-Telegram.

Columnist Thomas L. Friedman is on vacation.

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