October 4, 2002
Meeting Business Halfway on Ethics
The fun part about Senate hearings, if you are a Senator, is that you get to ask the questions. You're not the one taking the oath to be truthful, with right hand raised, about to face the bright lights of a public inquisition. Thus it is hardly surprising that the bee-hive of media scrutiny over the suddenly red-hot issue of business ethics has been similarly one-sided. The villains in this high profile frenzy of finger pointing have been clearly identified, and they're sitting atop the organization charts in corporations all across the country.
Few of us are happy with the situations unfolding in the collapsing business empires of the likes of WorldCom, Enron, or Tyco. But if it pains us to see unscrupulous individual executives, or their companies, pocket huge profits by skirting and manipulating the laws that govern corporations and commerce, we should keep in mind that these failures say as much about our system as they do about individual integrity.
Indeed, as we decry the decline of ethical behavior in corporate America, and pressure our business schools and mentors to do a better job of teaching future business leaders what is "right," we should recognize that what is said to be ethical, and what is encouraged by the law, are often two very different things.
Consider, as an example, the plight of the state of Alabama. Ten years ago, that state's leaders decided to jump start its long underperforming economy by dangling some very attractive incentives to businesses agreeing to relocate there. Its benefits have been hard to deny -- the state now boasts gleaming new plants built by companies like Mercedes, Honda, and Lockheed-Martin.
But like every other state in the country, Alabama has been hit with a deep decline in revenues from its corporate taxes, down nearly 50 percent from their pre-recession peak. Most of that is simply the economy, but the hit on tax collections was made worse by companies taking advantage of the tax breaks which led them to locate in Alabama in the first place.
Now those same companies find themselves embroiled in the nasty rhetoric of a gubernatorial campaign that takes them to task for not paying more taxes, in a national climate that has made anyone in a tailored suit a convenient whipping boy.
The after-shocks of the California electricity crisis are another case in point. Documents coming to light as part of the state's effort to recover part of the sky-high prices it paid to energy brokers at the peak of the power shortages reveal a disturbing pattern of fraud and manipulation on the part of sellers. They support the long-voiced contention of state leaders that what wiped out their state treasury was criminal greed.
But if California got taken to the cleaners, its leadership left the keys in the truck with the engine running. Its quasi-regulated system held retail prices fixed, directing its utilities to the thinly-traded spot markets to meet their short term energy needs. But the system created countless bargaining situations where energy sellers held all the cards. Is it any wonder that they sought to maximize their advantage?
We've tinkered and fine-tuned the laws governing taxes and commerce in this country for hundreds of years. With every round of revision and amendment, more loopholes, intended and otherwise, are created. We should depend on those laws, not the periodic outbursts of public outrage, to protect us from abuses that undermine our confidence and trust. Meeting business halfway, by tightening and simplifying the tax laws and other regulations, is needed if we really want to clean up our act.
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