Bernard Ebbers was convicted last week and is almost definitely going to jail for a long time. The real problem with the Worldcom debacle is not the lost money or lost jobs. The real problem is how economic illiterates, be they politicians or pundits, interpret such events. They constantly highlight the Enrons, Worldcoms, etc .... as examples of corporate treachery. In this they are correct, these companies were clearly complete frauds. Where the econo-illits drop the ball is on inference. By one count, there are 14,000 publicly traded companies. To use 10 (at best) bad apples to indict the other 13,990 corporate citizens is logically vacant, to say the least.
Yet this is what happens on a daily basis, and the ramifications have not been good. Sarbanes-Oxley, the rotten fruit of the econo-illits, has added billions in annual legal costs to public companies. So while politicians and lawyers delight at having added another legal hurdle to our already overly regulated and litigated economy - once again the average American loses. Along with the higher legal costs of compliance, fewer talented executives want to run public companies, many public companies are going private, and fewer promising companies will wish to go public.
I don't see how fewer public companies with weaker managerial talent is at all good for the average American investor.
10 offenders out of 14,000 - I would say that the free market was already doing a good job of sniffing out frauds.
No comments:
Post a Comment