Four Ideas for Reforming Corporate Governance Post-Enron

Article Tools

Print

E-mail

Comments

RSS

2. Bar law-breaking companies from government contracts. Earlier this year, both Enron and Arthur Andersen were suspended from contracting with the federal government. Yet suspensions like these remain far too rare, as companies with far worse records still feed at the government trough in massive amounts. Lockheed Martin, for example, has an outrageous 63 violations and alleged violations, yet its 1999 government contract awards totaled $14 billion. 'There's no reason to be giving a contract to a repeat violator,' says Rep. Carolyn Maloney, a New York Democrat on the House Government Reform Committee, who plans to introduce legislation requiring a central database of contractor violations. Ultimately, contract suspensions or debarments should be required for companies who face more than one criminal conviction or civil judgment in three years that's the recommendation of the Project on Government Oversight (POGO) in its May report 'Federal Contractor Misconduct' www.pogo.org. Companies like Boeing with $14 billion in federal contracts, Raytheon with $8 billion, and General Electric with $1.6 billion, all have two dozen or more violations and alleged violations. If they faced threat of contract suspension, ethics would become a genuine bottom-line concern which is the only way to make ethics real to these folks.

3. Create a broad duty of loyalty in law to the public good. Today a corporate duty of loyalty is due only to shareholders, not to any other stakeholders, and Enron behaved accordingly using tricks to drive electricity prices up 900 percent in California and thus fuel a spike in the company's share price. Such piracy against the public good would be outlawed under a state Code for Corporate Citizenship, proposed by Robert Hinkley (RCHinkley@media2.hypernet.com), formerly a partner with the law firm Skadden, Arps, Slate, Meagher & Flom. His change to the law of directors' duties would leave the current duty to shareholders in place, but amend it to say shareholder gain may not be pursued at the expense of the community, the employees, or the environment. (For an article by Hinkley in Business Ethics, see www.DivineRightofCapital.com/change.htm.) A group has formed in Minnesota to pursue passage of the new law there, led by John Karvel (JKarvel@scc.net).

RSS | Comments | E-mail | Print