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New Media Age
August 29, 2002
Julie Meyer, CEO, Ariadne Capital
The certification of company accounts by senior executives should
be a non-event. Now, however, under the US's new Sarbanes-Oxley
Act, the CEOs and CFOs of 14,000 firms listed in the US, including
those based overseas, must certify their accounts. This essentially
enables the Securities and Exchange Commission (SEC) to set itself
up as a global regulator. Not surprisingly the European Commission
has objected forcefully to the extra-territorial impact of the Act.
Europeans tend to be more jaded than their North American peers.
The former will assume that it's human nature to swindle; the latter
will try to regulate ethical business practice. Both are right,
and both are wrong.
In Ayn Rand's seminal work Atlas Shrugged, the figure of John Galt
goes on strike and takes the top businessmen with him to prove to
the political class what it means when the "engines of wealth
creation" leave the economy in the hands of the bureaucrats.
In the real business world, Business Week recently noted that "Amazon
is all grown up, except for its accounting." Mistrusted accounting
is a big problem, but trust is worth more than any hit the company
would take readjusting its statements. With the stock market continuing
to plunge, some companies need to come forward as statesmen and
raise the bar on standards.
Meanwhile, telecoms analyst Jack Grubman pocketed $32m (GBP 21m)
as he left Salomon Smith Barney without truly acknowledging how
he might have contributed to the loss of faith in the markets and
the loss of savings by people who bought shares based on his guidance.
What do these have in common? What can they tell us about the world
we live in?
My point of departure is always the individual. In the moment of
choice, choose integrity. You can no more regulate integrity than
you can legislate it. Integrity prevails when one is confident of
one's own abilities and doesn't feel the need to take from others
in the pursuit of wealth and happiness. That may sound a little
trite, but it's not naive, for trust is the very foundation of well-run
markets and businesses.
On a daily basis one must be vigilant, committed and active as a
shareholder and a citizen, demanding clear explanations about how
companies and governments are run. Italians have a word, dietrologia,
which is the study of what you can't see - or basically, what's
really going on that 'they' don't want you to know.
While there's always some turbulence in free markets and free societies,
the cycle of greed has clearly led to one of fear. The cost to business
of strict regulation (because its leaders have worked unethically)
is huge.
Three years ago one could have written about the power of the individual
and all heads would have nodded in agreement, but no-one would have
been listening as the rush of the bull market was overwhelming.
Today we know more than ever that the integrity of the individuals
is the only power that can ever be really sustained.
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