Bush's Corporate Conduct
By E. J. Dionne Jr.
Washington Post Columnist
Friday, July 12, 2002
When President Bush spoke to cheering Wall Streeters this week, you almost expected him to take a leaf from another old pro and declare: "The era of big corporate power is over."
Bush's job was to launch a massive repositioning campaign. He and his fellow Republicans have long been unapologetic advocates of freeing corporations and their leaders from the obnoxious, officious meddling of government regulators. Suddenly, thanks to the scandals and the sagging stock market, CEO liberation is not such a hot idea. As often happens in a democracy, the leaders are racing to stay in front of the people.
But Bush's magic failed him, one of the few times it has since Sept. 11. The magic was gone for the most basic reason: In his heart of hearts, the president doesn't really believe that anything is systematically wrong with the way corporations are run and regulated. That's why the modest regulatory changes he proposed were aimed at stiffening penalties against a few bad actors, on the theory that most corporate leaders "do not cut ethical corners." Events are outpacing Bush, because while he wants to bow rhetorically before the new public god of corporate accountability, he doesn't really want to catch up with those who would write much tougher rules to change the incentives for accountants, CEOs and corporate board members.
And so, while senators of both parties were voting to stiffen Sen. Paul Sarbanes's corporate reform measure, Treasury Secretary Paul O'Neill came out against the new system to regulate accounting that is the heart of the Maryland Democrat's bill. Rarely has the clash between Bush's well-wrought public rhetoric and his actual policy preferences been so obvious.
The fact that there is a substantive -- one can even say principled -- difference between Bush and the Democrats on the matter of corporate accountability is one reason why this issue has a long shelf life. A second is the sudden relevance of the corporate careers of Bush and Vice President Dick Cheney.
Yesterday's newspapers offered a taste of what is to come with a report that, as a director of Harken Energy Corp., Bush received the very kind of insider loans that he condemned in his Wall Street speech. The news was relevant not because the president did anything illegal but because he has embraced high ethical standards against insiderism. Everything that Bush did as a businessperson, and everything that Cheney did as CEO of Halliburton, the oil services company, will thus be judged not only by legal standards but also by Bush's own, newly minted standards. This increases pressure on Bush and Cheney to reach into their respective pasts and disclose, disclose, disclose.
Behavior that's legal can become questionable when ethical norms change, and this scandal is producing a new ethic for CEOs. Much of the behavior being condemned these days was fostered by the business culture that took hold in the go-go years of the 1980s and 1990s.
Corporate execs once felt constrained by a community-minded spirit bred by the nation's shared experience of the Depression, the New Deal and World War II. In such a climate, CEOs thought it wise not to grab for every last dollar. To some degree, O'Neill himself is part of this old school. But since the 1980s, those who allowed their personal compensation to be constrained were seen as fools and fogies who just didn't "get" the post-1970s capitalist world.
The brilliant, business-school-educated sharp guys came up with exceptionally inventive ways to hide losses and evade taxes. CEOs and corporate boards who resisted these new ways were seen as over the hill. You wonder: Have those sharp guys been dumping stocks because they know what is hidden in the books?
What finally makes this business scandal more than a short-term obsession is a new split among leading actors in the business community. Investors, it turns out, have interests sharply at odds with those of CEOs and even corporate boards. That's why investors, on the whole, responded less favorably to Bush's speech than the CEOs did. And the shrewdest corporate leaders favor tough reforms so that America's markets can regain public confidence -- especially the confidence of foreign investors who might accelerate their flight from the dollar.
Large-scale reform almost never happens unless some part of the business community supports it. Life is always awkward for pro-business Republicans when the business community splits on a major public question. Bush is dealing with the toughening of corporate ethics, a new tide for reform, a shaky market and a divided business community -- all in the context of his own past. No wonder he's had a hard week.
© 2002 The Washington Post Company
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