topic by
John Calvin
6/28/2002 (23:24) |
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This article exaggerates the possible response of Americans. They are a bunch of sheep who will view the present scandals as unfortunate but only natural.In the future executives will simple have to be more careful not to be 'caught out'
American dream dies of greed and corruption
thescotsman.com
BACK in the 1960s, when the world was young and the United States represented all that was fresh, hard-working and honest in big business, those of us not lucky enough to be born American looked on in awe at the scale and efficiency of its industry and commerce.
It was the era of how-to books and the power of positive thinking. Manufacturing giants like General Motors, Ford and Boeing led the world in engineering; IBM would show us the future; Ma Bell planned to keep us all connected; and the US financial system provided the umbrella under which we walked, like ants beneath the canopy of the rain forest.
So what has gone wrong? Forty years on, following the recent sequence of scandals that has rocked the business community and sent share prices tumbling around the world, the trust of the people in corporate America lies in ruins. Even the right-wing commentator Bill O’Reilly, whose uncompromising slogan is 'liberals beware', has accused the new generation of hi-tech plutocrats of 'corporate terrorism'.
Once, it was taken for granted that tycoons, even those who were wilful and greedy, felt an obligation not merely to stockholders and those who worked for them, but to posterity. Today, as hard-graft manufacturing, with its five-year plans and big-budget research programmes, gives way to businesses that in retrospect seem to have been invented on the back of an envelope, the only safe assumption made about entrepreneurs in the public mind is that they will do anything to protect and defend their remuneration packages.
Top executives in the US, as in Britain and Europe, now earn so much more than even their most valued and highly qualified employees that they are removed from them at every level. Decisions to cut a thousand jobs, close a factory or switch production to Mexico or the Czech Republic are taken by cadres of Miracle Grow tycoons whose loyalty appears to be only to themselves and whose five-year plans, starting with a golden hello, continue with annual bonuses and stock options before ending, increasingly, in a race for the airport, pursued by the law.
Chief executives and their closest confidants, together with the accountants who are supposed to keep them in line and ensure that they do things right, are now assumed by Americans (many of them small-time investors), to be in the business first and foremost of getting rich quick.
There is a dawning realisation here that employees, shareholders and customers are being routinely disparaged and discounted, as if their only role has been to build the wealth of those at the top in the shortest possible time.
The collapse this week of WorldCom, the nation’s second largest long-distance telecommunications provider, is a perfect example of post-modern corporatism. As with the disgraced energy giant Enron, WorldCom did not actually 'make' things. It 'linked' people and businesses and provided them with 'essential' services. Deep down, the fact that its core business turns out latterly to have been fraud and deception, to the tune of $3.9 billion, cannot have come as much of a surprise.
In the WorldCom case, as with Enron, failings that ought to have been exposed were concealed and left to fester by Arthur Andersen, an accounting firm whose professional ethics would have offended the conscience of Ebenezer Scrooge.
Enron is now little more than a shell company. Former staff and stockholders have been left high and dry. Arthur Andersen, or what’s left of it, stands convicted of impeding an investigation by the Securities and Exchange Commission (itself accused of supervisory negligence), and WorldCom, which has laid off 17,000 workers, is struggling to survive.
But they are not alone. Adelphia, the sixth-largest supplier of cable television and other information services in the US, has filed for Chapter 11 bankruptcy protection. Its founder, John Rigas, and his family came to see their publicly quoted company not as a supplier of television and interactive services, but as a private bank. They milked it of billions of dollars, which they used to fund doomed ventures intended to make them mega-rich instead of just super-rich.
Then there is Dynergy. The Houston-based trader and distributor of natural gas, coal and electricity, providing 'services' to much of western Europe, including the UK, is most active today in the business of selling assets, cutting dividends and slashing spending. It turns out to have a shortfall of $2 billion and its share price, once $50, has tumbled to less than $7.
The accountants during the relevant 'down' period? None other than our old friends Arthur Andersen.
Nor should we forget Tyco International, headquartered in Exeter, New Hampshire, but based for tax purposes in Bermuda. Tyco, engaged (surprise, surprise) in telecommunications and electronic systems provision, has debts totalling a whopping $27 billion. Its former chief executive, Dennis Kozlowski, was charged this month with evading $13 million in sales tax on various private art sales and then tampering with evidence to conceal the suspected crime.
But why stop there? There was the Merrill Lynch scandal earlier this year in which it was revealed that New York’s leading broker encouraged small investors to put their money into failing stocks in order to curry favour with top corporate clients.
Xerox, a company that actually makes things, joined the rogue’s gallery yesterday, while in New York, Martha Stewart - a combination of Nigella Lawson, Shirley Conran and Anita Roddick - is being investigated for alleged insider trading. Her company, Living Omnimedia, has dropped in value by about $200 million.
While all this is going on, another company, engaged in the blameless business of moving Americans around by rail is in big, big trouble. Amtrak, the privatised rail provider, has spent billions of dollars in recent years trying to modernise the US’s hopelessly antiquated railroad system. It needs a paltry $200 million to keep going. The government is wagging its finger. The big banks look askance. If the company is forced to suspend business, millions of people will be seriously inconvenienced. Yet somehow, it barely registers on the radar screen of corporate concern.
Further irony might be seen in the treatment of Microsoft. Microsoft - which is by a long way the dominant force in computer software - is regularly excoriated, and taken to court, for its alleged manipulation of the market. But the company has never - so far as we know - falsified its accounts, and Bill Gates, far from being self-indulgent, is busily giving away some of his extraordinary fortune to good causes around the world, including several in Britain.
In the game of heroes and villains, Mr Gates seems to have been wilfully misplaced, almost as if his firm’s profits had been put in the 'default' column of its books by a dodgy accountant.
President George Bush, who presided over Texas as governor for eight years - during which time Enron and Dynergy constructed their respective mirrored halls - says he is 'outraged' by what is happening and has vowed to 'hold people accountable' for what has gone wrong. Republican pollsters say that, in a congressional election year, the danger for the president is that 70 per cent of voters who owned stocks supported Mr Bush and the Republicans in 2000, but have now seen their savings shrivel.
'It is only after the bubble bursts and great piles of money are lost that people ask the critical, penetrating questions that they should have asked before,' the Washington Post said yesterday. 'The impact on American business and society is likely to be profound. Never before had so many Americans had so much of their savings, their compensation and their futures tied up so directly in the stock market. And never before had American business come to rely so heavily on the market, not simply as a place to raise capital but as the ultimate arbiter of success.'
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