Integrity
Matters
August 6, 2003
Corporate
world must restore confidence
Question: (E-060)
Dear
Jim:
The
past year's crackdown on corporate corruption has helped
lure investors back to the stock market, but some companies
still haven't grasped the importance of reform.
How
can I trust an economic system that seems unable to fix
its problems?
Response:
Perhaps
we have been reading some of the same news stories. Mr.
William Donaldson, head of the Securities and Exchange
Commission, was recently speaking about the sweeping anti-fraud
legislation, enacted at the height of the scandals at
Enron, WorldCom and other companies that wiped out billions
in investors' savings. In his next breath he acknowledged
that there are still senior executives with greedy, yet
seemingly legal, practices that risk the retirement savings
of the rank and file. Mr. Donaldson mentioned that companies
(really the leaders) have to develop a new "moral
DNA" - a culture that will last beyond the current
management. Since when is ethical behavior new? Moral
principles have been around since the time of Adam and
Eve. Even though individuals may neglect to live by higher
standards, there is no reason to act like there were no
guidelines. Donaldson mentioned that mutual fund companies
should be required to make fuller disclosures of fees,
which are too complicated for many consumers to understand.
Once again, disclosure ought to be 100% open, clear and
understandable. Basic integrity by those advising customers
ought to be self-evident that the customer is to be served
honestly. Do we really need federal and state laws to
mandate straight talk?
He
goes on to suggest that investors should be told if their
brokers have been given special inducements to sell particular
mutual funds. What kind of investment advisor would not
be forthcoming about conflicts of interest? Certainly
an honest broker would be up front with any recommendations
that grew from a personal agenda. Young people today have
created a three-letter word that expresses my response
to this comment: Duh! It is a sad commentary if those
we need to trust with our life savings are hooking us
with artificial promises so that they can take advantage
of our lack of sophistication and leave us with less that
we started, while they "fee us into oblivion."
Restoring
confidence is job No. 1 of leaders, from Wall Street to
Main Street, from Sacramento to Washington D.C. The time
is now not to be lured back to the market by manipulative
and self-serving worldly wizards of money. Rather we want
to be led back to a renewed level of confidence in a marketplace
by concerned "fellow advisers with integrity"
to what once was good in our society and could be good
again.
Leaders,
are you listening?
