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Tips Sheets: Business, Law & Econ | Culture & Living | Medical Science & Health | Science & Technology Economist Murray Weidenbaum has a six-point plan for restoring faith in corporate governance Media assistance: Gerry Everding - (314) 935-6375 Source: Murray Weidenbaum - (314) 935-5662 Related: Directors & Boards magazine Related: Download the complete article by Murray Weidenbaum - (Adobe Acrobat required) [St. Louis, Mo., October 2002] - American business is at a critical crossroads, suggests noted economist and public policy expert Murray Weidenbaum, the Mallinckrodt Distinguished University Professor at Washington University in St. Louis. Restoring confidence in the U.S. system of corporate governance is a tall order, but Weidenbaum suggests that specific courses of action are clear. He is available to comment. Murray Weidenbaum Writing in a recent issue of Directors & Boards magazine, Weidenbaum identifies six of the most troubling questions now being raised about corporate governance in response to widespread reports of corporate crime, scandal and mismanagement. Then, drawing upon three decades of experience as an economist in government, business and academia and as a long-time member of numerous corporate boards, Weidenbaum responds to these questions with a modest six-point agenda for reforming corporate governance in the United States. In brief, he calls for a refocusing of the role of the accounting firms; holding the legal profession responsible for its share of responsibility for shortcomings in corporate governance; putting more onus on boards of directors; and waking up the audit committees. He contends that the effort to get top management to think like shareholders has not only failed, but it has backfired. He suggests that the levels of integrity and ethical behavior expected of the rank-and-file should be extended to senior management. A long-time scholar of government efforts to regulate business, Weidenbaum warns that American business must respond promptly and constructively to these issues or run the risk that current severe challenges to corporate governance will expand to crisis proportions. The recent rash of emotional demands for increased government meddling in the internal decision-making process of business management are being fueled, he notes, by a variety of strong external pressures, including the general downturn in the economy and the aftermath of the 9-11 terrorist attacks. Among his list of most troubling questions are the following: Have the accounting firms lost their independence and integrity in the effort to expand the scope of their operations and the profits that they receive? Are lawyers failing to alert their corporate clients to the perils of using clever ways of cutting corners in meeting the requirements of law and regulation? Have the boards of directors of corporations been unable to keep up with the intricacies of business finance and thus have they not adequately performed their critical role of overseers of management? More specifically, have the audit committees failed in their function of providing the fiscal conscience of the corporation? Has the effort to get top management to think like shareholders -- especially by using options major portion of compensation -- backfired? Is there in effect a double standard in much of American business: Are rank-and-file employees expected to meet higher levels of integrity and ethical behavior than top management? These are loaded questions which the typical honest American business manager must resent having to hear, much less answer. "Surely, that was my personal response as a corporate director," Weidenbaum writes. "Nevertheless, these questions -- and many others in the same vein -- reflect the growing public dissatisfaction with the state of corporate governance in the United States. The underlying resentments are not new, but they may have been submerged when the stock market was booming. The less favorable stockholder experiences of more recent times has brought these long simmering concerns to the surface."
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