The federal indictment of Bernard J. Ebbers, the former CEO and chairman of WorldCom, is but the latest in a long list of actions taken in reaction to the wave of corporate fraud and financial finagling that accompanied America's great boom and bust. To those cynics who predicted that nothing much would be done to reform Big Business and Wall Street just look at the record.
New York Attorney General Eliot Spitzer negotiated settlements that reduce conflicts of interest among stock analysts, clean up the initial public offering market, provide independent research to investors, and punish investment banks for past sins. He is now taking the mutual-fund industry to task for late trading. Congress passed Sarbanes-Oxley legislation that reforms both accounting and corporate governance while the Financial Accounting Standards Board is about to implement new rules requiring companies to expense stock options.
Meanwhile, the list of corporate chieftains charged with illegal acts grows. WorldCom's Scott D. Sullivan pleaded guilty, Enron Corp. ex-Chief Financial Officer Andrew S. Fastow pleaded guilty, and former CEO Jeffrey K. Skilling is under indictment. Only former Chairman Kenneth L. Lay remains untouched. Tyco International Ltd.'s (TYC) Mark Schwartz and L. Dennis Kozlowski are on trial. HealthSouth Corp.'s (HLSH) Richard M. Scrushy is about to go on trial. Adelphi Communications Corp. (ADELQ) founder John Rigas and his two sons are on trial.
America has many strengths, but none is as important as its ability to quickly repair itself. After a series of business and financial scandals unprecedented in modern times, the system is now fairer and more transparent. The quality of earnings is higher, boards are more independent, and investors have renewed confidence. Thanks to reform, the foundation for a strong rebound in the economy in the months ahead has been laid.