A short walk around downtown Houston is like a tour of corporate miscreants.
There’s Enron, of course. And Dynegy, and El Paso Corp. across the street. And Reliant Energy Services.
Enron already has collapsed. The others are weighed down by serious questions about energy trading or accounting.
It’s as if the CEOs in Houston got together and came up with a boneheaded distortion of the old edict about people in glass houses: Companies housed in glass towers shouldn’t blow it alone.
If only such shenanigans were limited to Houston. But it’s hardly the case. Look across the country, up and down the roll call of big companies, and there’s trouble nearly from A to Z.
Abbott Laboratories? Continued compliance problems in its diagnostics unit more than three years after a $100 million settlement with the Food and Drug Administration.
Andersen? Virtually vaporized in the Enron aftermath.
Cendant Corp.? Questions about accounting. General Electric? Accounting. Global Crossing? Accounting. Halliburton? Accounting. Kmart? Bankruptcy and, you guessed it, accounting.
Merrill Lynch’s novel thinking: taking stocks its analysts wouldn’t touch and peddling them to customers. Or Microsoft, putting a new twist on accounting tricks–to understate results.
Then there’s Salomon Smith Barney, where analyst Jack Grubman gave bullish reports on Global Crossing while handpicking the CEO and advising on a big merger.
Tyco, with its sales-tax averse CEO, Dennis Kozlowski. And WorldCom, where former chief Bernie Ebbers got a free $341 million loan.
Whew.
Sports fans sometimes beef about the influence of money in sports. The sports pages these days are less about games and more about business.
Now business aficionados have the opposite gripe: The financial pages are too often about companies trying to game the system.
Enough already.
There was a time when all it took to follow business was a good eye for strategy and a good head for numbers. Now we need a good nose for a scandal and a strong stomach for indigestion.
Investors don’t like this change, of course. By some estimates, investors have lost $4 trillion in market value in scandal-related stock drops.
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Other decades have had their trademark trends. The go-go ’80s. The dot-com ’90s. And now? The uh-oh ’00s.
The damage won’t be easy to repair. It’s partly for a lack of easy solutions, but mostly for a lack of will among those with the power to force change.
Former Federal Reserve Chairman Paul Volcker suggested some solid accounting reforms in his brief tenure as Andersen’s emergency repairman. But Volcker’s reforms seem to have evaporated along with Andersen.
The New York Stock Exchange rightly has suggested that the cleanup start at the top, in the boardrooms. Chairman Richard Grasso last week proposed adding more independent directors and prohibiting company officers from serving on board audit and compensation committees.
Grasso wants CEOs to sign off on financial statements, and shareholders to vote on stock-compensation plans.
It seems like common sense. It’s too bad that in the jaundiced world of corporate governance, they’re seen as revolutionary and, perhaps, unlikely.
Grasso said he’ll wait on the reforms until big companies, big investment firms and others weigh in. Sounds like an invitation for evisceration.
Still, it’s a positive step that reform is on the tongues of market leaders, if not yet fully in their hearts. Goldman Sachs Chief Executive Henry M. Paulson Jr. last week called for insiders to stop dumping stock and for Wall Street firms to end conflicts of interest.
“I cannot think of a time when business everywhere was held in such disrepute,” Paulson said.
Reform is in everybody’s interest. Too bad that, until the run of scandals, Corporate America expressed so little interest in it.
It’s time for action, not more talk. Then, maybe someday, a walk through Houston, New York or Chicago won’t be filled, step by step, with the names of companies that have stepped into deep trouble.