Well, it seems the most recent scandals have made a WorldCom of difference.
Any politician with an instinct for self-preservation (and what other kind is
there?) no longer can be seen as standing against corporate reform. So the "genius
of capitalism" crowd has adopted a new strategy: publicly embrace reform while
working diligently behind the scenes to undermine it.
It's a time-honored Washington ploy--the strategic retreat stage of a three-part
campaign that starts with full-bore resistance, moves on to insincere support,
then culminates in back-channel efforts to kneecap whatever meager reforms manage
to survive the legislative process. For a textbook example of how this game works,
one need look no further than the efforts of the Business Roundtable, a powerful
lobbying group made up of the CEOs of 150 of the largest corporations in the nation.
As recently as mid-May, the CEOs were still in Stage One: full-throated resistance
to change. Standing shoulder to shoulder with such anti-corporate reform stalwarts
as Sen. Phil Gramm (R-Texas), Rep. Michael G. Oxley (R-Ohio) and, yes, President
Bush, these slightly rusty Knights of the Roundtable helped lead the charge against
the accounting reform bill by Sen. Paul S. Sarbanes (D-Md.). In a letter sent
to members of Sarbanes' Banking Committee, the Business Roundtable expressed concern
that the bill would "inhibit the ability of U.S. public corporations to compete,
create jobs and generate economic growth." Note to the 17,000 employees who are
the collateral damage of the accounting-triggered explosion at WorldCom: Be sure
to send your resumes to the Business Roundtable. It's looking out for you!
Instead of strict new laws, the chief executives came out in favor of industry
self-regulation, "strongly encouraging" all American companies to adhere to the
Roundtable's freshly minted "Principles of Corporate Governance." These "guiding
principles" included calling on accounting firms to carry out their work "in accordance
with generally accepted auditing standards." Generally accepted by whom, Arthur
Then came WorldCom, and the Business Roundtable quickly shifted to Stage Two--also
known as the old "hug and mug." In this PR-savvy ploy, you reverse your rhetoric,
but your goal remains the same: gutting any prospect for meaningful reform.
So you hit the Sunday morning talk-show circuit, as Roundtable Chairman John
Dillon did this past weekend, and tout your support of the very bill you were,
only weeks before, working so hard to kill. The idea is to hop on the reform bandwagon,
collect the PR points, then wait for the wheels to come off said bandwagon.
And no one is holding Dillon's or the president's feet to the fire over their
foxhole conversions. After all, Bush is as adept at the abrupt face-saving about-face
as anyone. In his schoolmarmish lecture to Wall Street, he called for arming the
Securities and Exchange Commission with 100 new enforcement officers--just months
after proposing cutting back the SEC's fraud investigators.
Of course, if there is one thing politicians understand, it's punishment at
the polls. And with a tidal wave of public outrage as powerful as the one currently
heading their way, there is a very good chance that some version of reform will
actually make it out of Congress and go to the president for his signature. In
which case, you can expect the anti-regulation zealots to quickly shift to Stage
Three: accept and reload.
This phase features the tireless search for underhanded ways to circumvent
whatever regulations Congress ends up imposing. Just look at what happened with
campaign finance reform: After years of bloody congressional battles, supporters
were finally able to pass a bill banning soft-money donations. But never underestimate
the resourcefulness of those looking to maintain the status quo: Last month, the
administration's friends at the Federal Election Commission took a carving knife
to the new regulations, slicing open loopholes through which millions in soft
money can continue to pour into political party coffers. As they say on K Street,
"It ain't over till the fat cats sing." And you can bet they'll be in full chorus
when it comes to undermining corporate reform.
The devil is in the details--and so is the stabbing in the back of true reform.
Be on the lookout for reformers-come-lately floating proposals that seem reasonable
on the outside (like allowing shareholders to vote on CEO stock options) but really
wouldn't change a thing (management almost always has enough proxy power to control
the outcome of any such vote).
The enemies of reform will be spending millions of dollars--and every waking
hour--making sure there are enough loopholes in the small print to keep the pigs
gorging at the trough. The only thing that will make it possible for the handful
of real reformers to keep the corporate swine at bay is public outrage.
Copyright 2002 Los Angeles Times