Viewpoint -- The Responsibility For Regaining Public Trust

More prescriptions for treating the acute crisis of confidence in U.S. corporate management have been written during the past six months than the number of drug prescriptions your doctor probably writes for you over the course of several years. Some of the prescriptions, including a few of the 10 points that the Bush Administration wrote out in March, seem more like placebos: designed to produce the psychological lift of treatment without having any impact on the system. Others, including the reforms of corporate accounting advocated by PricewaterhouseCoopers CEO Samuel A. DiPiazza, would fundamentally alter functions. For example, the net effect of the financial reporting principles that DiPiazza prescribes would be a write-off of U.S. generally accepted accounting principles and adoption of broader global guidelines similar to existing International Accounting Standards. His reforms deserve serious consideration, as do proposals aimed at ensuring that boards of directors are, in the words of AFL-CIO President John J. Sweeney, watchdogs and not lap dogs. Proposals that would require shareholders to approve executive stock-option compensation also deserve serious consideration. As do proposals to establish a public oversight board for auditors and to create a new panel to write accounting rules. They deserve serious consideration, not because I necessarily believe each has some special merit. They deserve serious consideration because in the understandable emotions of the moment to act -- to do something -- there is a Hippocratic-like need also to do no harm. Indeed, differential diagnosis -- the process of sorting through symptoms to determine what's actually going on -- is far from complete. However, I am not suggesting that CEOs, COOs, CFOs and all sorts of corporate officers and members of corporate boards of directors retire to some kind of business waiting room and stand by for results. Quite to the contrary, C-level executives should be leading the effort to diagnose their companies' current conditions and implement any necessary changes. For example, Coca-Cola Co. Chairman and CEO Douglas Daft has announced a change in the firm's accounting so that its earnings reflect the value of stock options it has granted to executives and other employees. His thinking seems to be that stock options, like other forms of compensation, are an expense and should appear as an expense on the financial statements to better reflect the condition of the company. However, no new set of rules, no code of conduct and no prescriptions -- even those written by such wise persons as the Blackstone Group's Peter G. Peterson and former Federal Reserve Chairman Paul Volcker -- will make CEOs or their companies worthy of trust. Only CEOs can do that. Only CEOs -- and other corporate officers -- by behavior that can be seen by everyone, can make themselves and their companies worthy of trust. Former CEO Donald L. Evans is the most partisan U.S. Secretary of Commerce in recent memory. Indeed, at times he seems to less Secretary of Commerce and more White House Cheerleader-in-Chief. Yet, Secretary Evans was not being partisan, was not unabashedly being a Bush booster when recently he almost -- but not quite -- reminded CEOs of their fundamental roles. "Great authority is vested in the men and women who run our public corporations, and with such power comes responsibility," he stressed at the Cleveland City Club on July 12. "The public sector may set the rules, but the private sector makes the system work. The charge of our corporate leaders, in that context, is a great one. And in the current environment, it is even greater. Our CEOs are public servants. The responsibility falls to them to provide workers with the chance to create, to build and to pursue." The words were good as far as they went. But Evans should have gone further. Evans should have added that, above all else, CEOs and other senior corporate officers have a responsibility to take responsibility for what they do and how it is done. As a professional writer, my name is on my work and I take responsibility for it. I am liable -- by law and by reputation -- if I err. A corporate CEO must be held to no less a standard. He or she does not deserve responsibility unless he or she takes responsibility. Only then will the acute crisis of confidence be over. Only then will public trust be regained. One indication of the challenge ahead for CEOs is in the titles of two books I received this month. One is titled "Building Public Trust" (2002, John Wiley & Sons Inc.). The other is "How Companies Lie" (2002, Crown Business). John S. McClenahen is an IW senior editor. He is based in Washington, D.C.