Considering CEO ethics bubble |

Considering CEO ethics bubble

Don Cohen

Enron. Adelphia. Healthsouth. Worldcom. The past three years have been a long-suffering hangover from the white-hot, anything goes, everyone’s a day-trader 1990s. In the pursuit of profits, and in many cases, personal enrichment, business ethics seemed to be sealed in a padded envelope, stuffed in an archive box, and sent to storage in the basement.The mores of American business continue to take a drubbing in the general media with each new indictment and trial. John Horan-Kates, the president of the Vail Leadership Institute and a group of top national business leaders want to see that change. For the second year in a row the Vail Leadership Institute hosted the Changing the Game Forum: Reforming American Business.Over two days CEOs, CFOs, public company board members, university professors, business consultants and national financial reporters tackled, head on, some of the thorniest issues facing America’s corporations. These were men and women at the top of their profession who shared a collective disgust for the over-publicized and over-hyped stories of disgraced leaders like Lay, Rigas, Scrushy and Ebbers.”Changing the Game” definitely wasn’t a PowerPoint eyewash seminar. I felt I was back in graduate school. Spending time in the formal presentation sessions and at the social breaks, I couldn’t help but to come away feeling very positive about the future of American business. The energy, engagement and intellectual vibrancy of the presenters and the attendees underscored an optimistic determination that eschewed social chit chat and provided lively and meaningful discussions at the dining tables.After the first day’s introductory session and dinner I headed home and, as I do most evenings, thumbed through The Wall Street Journal. On the op-ed page there was a fascinating article providing a New York Stock Exchange board member’s perspective of former chairman Richard Grasso’s shockingly high $187 million compensation. As if on cue, the next morning’s session delved into this very issue. The discussion didn’t center around the amount of Grasso’s paycheck, but the environment of corporate governance that permitted it. Again, this was a roomful of people that represented a very elite tier of our nation’s business community. What was strikingly clear was their shared view that there is no moral or financial justification for allowing such excess. Not from high-powered CEOs and not from the boards that hold them accountable.Throughout the 1990s, as public companies stock prices soared the directors of many of those boards simply saw massive CEO bonuses as proportional rewards for the huge increase in their company’s stock value. In many cases these same CEOs also held the dual position of board chairman and chief executive officer. That duality of structure often created a culture of complicity with supposedly independent boards meekly aligning with the wishes of the CEO.As a matter of standard public company governance, members of the board also oversee separate committees to monitor compensation and finance (often called the audit committee). You’d think that with these checks and balances in place that the massive implosions at Enron and WorldCom would have been avoided. Clearly a lot of board directors weren’t taking their jobs that seriously. Now that Congress, the New York state attorney general and the Department of Justice have entered the fray, CEOs and their boards are paying much closer attention to the importance of ethical corporate governance.In its typically well-meaning way, Congress passed the Sarbanes-Oxley Act, which basically requires the CEO of the company to attest to the veracity of the company’s legal and financial public filings. The new industry lingo refers to this as “Sarbox.” The problem with Sarbox, as clearly enumerated during the Changing the Game forum, is that it now burdens public companies with another thick layer of compliance with only, at best, a modest effect on truly improving the internal ethics of a company.The Vail Leadership Institute’s program was impressive in its focus on pushing aside platitudes and searching for practical ways to improve the core ethical values of American business. However, from my own observance I don’t think that ethical dry rot is as pervasive as recent headlines proclaim. One participant spoke forcefully of the vast majority of companies that operate ethically and successfully every day. Reflecting upon his comment there was a strong sense in the room that the good news side to this story has gone underreported.Now to switch from the content of the forum to the event itself: John Horan-Kates has held a long-term vision of positioning the Vail Valley as a host to top national and international conferences that deal with the most vital subjects of the day. While generally small in size (Changing the Game had around 100 attendees) these conferences have the ability to not only attract well-heeled visitors, but to create another compelling opportunity for many of our community’s residents to be exposed to some of the best and brightest thinkers in the world. It’s a model we’ve proven to be successful in the arts. Why not in the business and intellectual arenas, too? Don Cohen, executive director of the Vail Valley Economic Council, can be reached by e-mail at

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