Two prominent CEOs have recently been given significant prison terms: Bernie Ebbers (WorldCom) and Dennis Kozlowski (Tyco). What difference do you think this will make in the behavior of business leaders in the future?
Human nature is a constant. And people engaged in what turns out to be criminal activity don’t see themselves in that light at the time. So a few high-level convictions are unlikely to have a significant lasting effect on corporate behavior.
More effective will be the new requirement that CFOs and CEOs sign off on corporate financial reports. Beyond the immediate focus on truthfulness lies a lurking awareness that the “I had no idea what was being perpetrated by others” defense will no longer wash.
I prefer to believe that most business leaders are inherently honest, unlike Mr. Ebbers and Mr. Kozlowski. Therefore, I don’t see these high-profile cases having any significant impact on these honest, law-abiding leaders. The most it will do is cause them to consult their legal counsel more often to make sure they aren’t unknowingly committing some offense. However, the few slugs out there that don’t have a conscience will probably think twice before committing any unlawful behavior.
Perhaps the well-publicized incidents will increase the pressure on companies’ legal departments. Perhaps they’ll embolden prosecutors. Otherwise, they’ll make no difference to the next Ebbers or Kozlowski. These are not bank robbers or car thieves; these are people who can’t imagine getting caught and convicted for their business practices. They regard themselves as exceptionally sharp operators who are smart enough to exploit weaknesses in laws and enforcement.
Hilton Head, SC
The substantial prison sentences for both Messrs. Ebbers and Kozlowski, as well as Enron’s former CFO Andrew Fastow, should send a powerful message to those future business leaders who might be tempted to engage in illegal and unethical conduct as a means to protect their own wealth and power. Such acts will not be tolerated by regulators, investors, and the business community at large. There can be no compromise to honesty and integrity on the part of directors and management, at all levels, in the exercise of their responsibilities. The rewards, both financial and otherwise, that come with completely ethical conduct are substantial.
I believe the conduct of a few has unfairly tainted many in the world of business management. Hopefully, the end result of the Enron, Worldcom, Tyco, and similar situations will help to eventually restore the trust in business leaders that is so vital to our economic system.