Nowhere to Hide: the Challenge of Managing Corporate Ethics.

Nowhere to Hide: the Challenge of Managing Corporate Ethics.

By Frank Vogl, President, Vogl Communications, Inc.

Address to Valmont Industries Accounting & Finance Seminar
Valmont Industries, Inc., Omaha, Nebraska. May 15, 2005.
Introduction

Corporate scandals have diminished public confidence in the leadership of American business. More investigations and scandals are probable and they may lead to still more public anger and more pressure on politicians and regulators to respond. The first round of scandals saw Congress pass the Sarbanes-Oxley Act. Since then we have learned about fraud and malfeasance in the mutual fund and insurance sectors and in a host of major corporations.



There is a grave danger that the politicians will continue to believe that they can legislate ethics. The danger is to our economic system. More official regulation will threaten the vibrancy of enterprise, undermine our free market’s creativity and flexibility and damage our economic prospects. It is urgent that business demonstrates that it recognizes these dangers, that it understands the need to restore public trust through its own voluntary actions.

Why has this crisis been so large and embraced so many corporations? There are many explanations, but an important one relates to technology. Embarrassing e-mails at Boeing, Enron, Merrill Lynch, Credit Swiss, Morgan Stanley and scores of other enterprises have shown how greed triumphed over sound ethics. The hard-drives of corporate computers are revealing secrets that are exposing myriad unethical practices. In this era of an aggressive Securities and Exchange Commission, Elliot Spitzer, the Internet and a media fascinated by business scandals, the corporations of America have nowhere to hide.

Thanks to the Internet the ability of corporations to keep information confidential is declining fast. Meanwhile, the scale of false information about corporations that appears on the web is multiplying. As we look ahead we must come to terms with four considerations:

1. The amount of information available in the public domain about every aspect of a publicly quoted corporation’s business will rise.

2. The number of investigations into corporate wrong-doing will increase.

3. The sophistication of pressure groups seeking to force corporations to reform will grow.

4. And, these forces will compel business to recognize that when there is nowhere to hide, then there is no choice other than to confront the wrongdoing in its midst and institute reforms consistent with this age of transparency.