Wednesday, June 15, 2005

the persecuted elite

Poor, poor Arthur Anderson. The once-mighty accounting firm, thousands of employees strong, now with only a couple hundred left to make its final arrangements. I’m sure many who worked there had little to do with the wrongdoing that brought the firm into the harsh spotlight of public opinion, but I find it hard to shed too many tears for the enabler of both WorldCom and Enron’s worst excesses. Stanford law professor Joseph Grundfest points to prosecutorial overreach in the jury instructions given in the Anderson case to suggest the greater problem may lie with power-hungry, unaccountable prosecutors than with the corporations they try to reign in. It’s a load of bunk. CEO compensation is on the rise again, buoyed by soaring profits. Growth is projected at around 3.5% this year. Corporate America is doing just fine (and, incidentally, predictions of sudden fiscal and economic doom from the left have been nearly constant since the beginning of the last election cycle, disregarding fairly steady economic improvement.) The only reason a lower court won’t try Anderson again with more reasonable jury instructions is because it would be gratuitous—like kicking a dying dog because you know it can’t bite. There seems to be a good deal of evidence to suggest that Anderson knew it was doing bad things, and there’s no telling that a new jury wouldn’t find it guilty—if it were ever brought to trial.
The Economist recently wondered whether the governance reforms instituted after Enron were cosmetic. Even if that is the case, the public is much less willing to give big companies the benefit of the doubt these days. The threat of prosecution or investigation that Grundfest is so concerned about may be the de facto solution to corporate rot, rather than more restrictive regulations. For this we have Enron’s corporate officers to thank for fleecing all those grannies out of their pensions.

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