“It has been almost five years since the current wave of ethical scandals hit U.S. companies starting with Enron. Since that time, many new laws have been passed. Are we now less vulnerable to corporate corruption? Why or why not?
Recent legislation related to business ethics has raised the liability of both CEO’s and CFO’s due to new provisions requiring their certification. When the Enron scandal became big news, Congress rushed into law the Sarbanes Oxley Act of 2002, containing a burdensome set of new regulations. Two of the most widely reported provisions are Sections 302 and 906, requiring public company CEO’s and CFO’s to personally certify periodic reports filed with the SEC. Both officers are taking personal risk by signing the certification because they are responsible for their own decisions as well as the work their employees are doing (or not doing).
While these provisions have many leaders very concerned, there is a silver lining for CFO’s. Traditionally CFO’s have been bound by stringent ethical requirements but those requirements on occasion less dreaded than the pressure the President or CEO would apply to improve or smooth out financial results. Because of the new certification requirements, CFO’s now have a significant point of leverage to which they can point to get their president to back off. The balance of power has shifted more decidedly to the CFO because he or she can say in effect “boss, we’re going to play this straight because I am not going to be subject to criminal sanctions for misstated financials”. Hopefully that is the end of the discussion.
The risk for corporate corruption will always exist. Now, are we less vulnerable to that risk today than we were five year ago? Maybe. But in reality, we can pass all the laws we want, we will never effectively legislate or regulate total compliance to accounting standards or eliminate the greed that often comes with power. The forces of good vs. evil have always been part of our world ands will continue to exist, whether we are fighting white-collar crime or terrorism. The only real way that corporate corruption goes away is when those in leadership positions of those corporate entites make the conscious decision to be people of integrity. There is no substitute for responsible leadership that adheres to and honors high moral character and rules of conduct as guiding principles. Eliminating corporate corruption starts with character-focused leadership.
Harold “Bud” Boughton