Washington hasn't led by example on corporate accountability

0 Comments | Insight on the News, August 5, 2002 | by Sean Paige

Newton's famous third law of motion apparently applies everywhere in the known universe except for Washington, where for every action there is an unequal and opposite overreaction.

And so it is with the rising chorus from the nation's capital favoring corporate responsibility and accounting reform in the wake of scandals at Enron, WorldCom, Tyco, et al.

Public opprobrium, stronger legal sanctions, greater corporate transparency and some strengthening of accounting practices may be necessary given the seriousness of proliferating business scandals and the nervousness of the stock market.

But Washington itself is no paragon of managerial or financial excellence (even fewer controls exist to regulate the way it manages taxpayer money). And if the whole episode becomes an excuse for federalizing the corporate world, piling bad regulations upon bad, it could backfire on taxpayers and stockholders alike and further shackle an already-overburdened economy.

"My administration will do everything in our power to end the days of cooking the books, shading the truth and breaking our laws," President George W. Bush recently told business leaders meeting in the shadow of the New York Stock Exchange. "In the long run, there's no capitalism without conscience. There is no wealth without character."

Bush proposed stiffer prison sentences for corporate cheats, creation of a corporate-fraud task force to watchdog boardrooms and business offices, increased enforcement powers for the Securities and Exchange Commission and a ban on corporate loans to top executives (a practice Bush himself benefited from a decade ago).

But no sooner had the president taken Wall Street to the woodshed than Democrats in Congress were saying "not enough" and ramming through their own package of reforms on a wave of bipartisan antibusiness sentiment.

Subsequent events demonstrated the futility and perils of Republicans trying to out-Democrat the Democrats. Instead of moderating debate and contributing to a targeted and reasonable approach on the question of corporate abuse, the president's rhetoric and actions seemed to whet the appetite of extremists eager for an open season on "greedy" business elites. Such actions may feel good in the short term, but almost certainly will have unforeseen adverse long-term consequences.

The White House didn't want to "overreact and create an entire new set of problems" with its proposals, one senior administration official was quoted as saying. But it seems to have done exactly that as the business-bashing bidding war, rather than bolstering investor confidence, immediately sent stocks plunging.

All the lecturing and political posturing seems more than a little hollow and hypocritical coming from a town where the books never balance, bureaucratic misdeeds and abuses of power routinely go unpunished, billions of dollars are lost or squandered annually and backroom deal-making and pork-barrel pillaging occur with regularity.

If not taken to predictable extremes, Washington's crusade for greater corporate responsibility and accountability could provide a sobering slap in the face that some in the business world evidently need. But there would be even more moral authority behind those calls for reform if political fat cats applied the same standards to themselves.

SEAN PAIGE IS A WRITER FOR Insight.