business

Cleaning Up Wall Street's Mess

Our Reader Survey finds that investors are angry -- and they're ready to take it out on someone

Of the more than 500 readers who responded to our May 3 online survey, "Cleaning Up Wall Street's Mess," only about 17% would rate the ethics of top corporate officers as good or excellent, vs. the 38% who rate them as fair and the 44% who rate them as poor.

Top officers of investment-banking houses come off even worse, with only 5% of readers crediting them with good or excellent ethics, and 69% giving them a rating of poor.

When it comes to assigning blame for ethical lapses, 30% of respondents cite the individuals involved, while 58% cite both the individuals and their companies. In fact, a rather large 42.7% say they've been in situations where their employer required or expected them to do something they regard as unethical.

Admirably, 60% say they would risk losing their jobs rather than do something unethical. But a brutally honest 15% say they would decide on which way to bend depending on the risk involved in the unethical act -- and the size of the reward if they weren't caught.

Readers would prescribe practically the same medicine for corporate officials who engage in accounting fraud as for analysts (and their superiors) who dispense misleading advice to investors: Some 35% and 38%, respectively, would suggest as punishment dismissal plus substantial fines. Some 61% and 56%, respectively, would send the offenders straight to prison.

As for preventative measures, some 60% of respondents would go for a list of four remedies, rather than pick just one. Here are the complete results:

On average, how would you rate the ethics of top officers at U.S. companies?

Option Total %  
Excellent 9 1.67 %
Good 83 15.43 %
Fair 205 38.1 %
Poor 237 44.05 %
No opinion 4 0.74 %

On average, how would you rate the ethics of top officers at U.S. investment banking houses?

Option Total %  
Excellent 8 1.50 %
Good 23 4.32 %
Fair 128 24.02 %
Poor 367 68.86 %
No opinion 7 1.31 %

In general, who do you think is most responsible for ethical lapses in companies?

Option Total %  
The individuals involved 163 30.35 %
The companies themselves 56 10.43 %
Both equally 310 57.73 %
Neither 2 0.37 %
No opinion 6 1.12 %

Have you personally ever been in a situation where your employer required or expected you to do something you regarded as unethical?

Option Total %  
Yes 228 42.7 %
No 278 52.06 %
Don't know 28 5.24 %

Would you personally be willing to risk losing your job by refusing to do something you think is unethical, but that your employer tells you to do?

Option Total %  
Yes 323 60.26 %
No 72 13.43 %
Depends on the size of the reward, vs. the risk of getting caught 81 15.11 %
Don't know 60 11.19 %

What remedy do you think is appropriate for top corporate officials who use accounting tricks to misrepresent a company's performance?

Option Total %  
A good talking to 1 0.19 %
Dismissal 19 3.55 %
Dismissal plus substantial fines 185 34.58 %
Prison 325 60.75 %
Other 4 0.75 %
No opinion 1 0.19 %

What remedy do you think is appropriate for Wall Street analysts and their superiors who exaggerate a stock's potential in order to bring in more revenues or boost their

Option Total %  
A good talking to 3 0.56 %
Dismissal 22 4.10 %
Dismissal plus substantial fines 203 37.8 %
Prison 299 55.68 %
Other 9 1.68 %
No opinion 1 0.19 %

What do you see as the best way to ensure that companies don't engage in accounting fraud?

Option Total %  
Remove the temptation, perhaps by capping executive compensation at a specific multiple of average pay for all employees in the 30 5.59 %
Make boards of directors liable for accounting irregularities 54 10.06 %
Enact tougher government oversight of corporate bookkeeping 11 2.05 %
Impose stiff punishments on individuals and companies that cook the books 108 20.11 %
All of the above 323 60.15 %
Do nothing: People who want to cheat will always find a way 5 0.93 %
No opinion 6 1.12 %

What do you see as the best way to ensure that stock analysts and brokerage houses don't purposely mislead investors for their own gain?

Option Total %  
Require that the people in a brokerage who analyze stocks have no contact with those who sell stocks or do investment-banking de 48 8.96 %
Make compensation for stock analysts contingent on the accuracy of their analysis, not on the investment-banking fees their anal 124 23.13 %
Require public companies to give equal access to all qualified analysts -- not just 38 7.09 %
All of the above 315 58.77 %
Do nothing: People who want to cheat will always find a way to 2 0.37 %
No Opinion 9 1.68 %
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