World's business leaders meet in Davos bemoans lost trust

DAVOS, Switzerland (AP) - The titans of international business wrestled mightily for six days at the World Economic Forum with how to repair public trust damaged by scandals over shoddy accounting and bankruptcies like Enron's. 

As the forum came to an end Tuesday, the earnest panel discussions and just-between-us-CEOs sideline chats had yielded a rough consensus that, yes, tighter laws might help - but ultimately can't stop executives willing to lie or steal. 

And, please: They can't run their businesses if they're filling out thousands of pages of new, well-intentioned red tape. 

"Doing the right thing: It's simple to say, but that sums it up,'' said William Parrett, managing partner for Deloitte Touch Tohmatsu USA and one of the many auditing firm executives taking part. 

Or, as Peter Brabeck-Letmathe, chief executive of Swiss-based Nestle put it, "we need less lawyers and less detail, and we need rock-solid principles.'' 

"It's not words but deeds that will restore public trust,'' Brabeck-Letmathe said at a Monday panel summing up the forum's work on the issue. 

The trust issue was the official theme of the conference, though it was sometimes overshadowed by the potential war in Iraq and fears about terrorism. 

Looming over all the business discussions was the Sarbanes-Oxley Act, the new, get-tough U.S. legislation passed in response to the corporate accounting scandals and bankruptcies such as that of energy trading firm Enron. 

The law forces chief executives to personally certify their accounts, quadruples jail terms for accounting fraud and creates a new felony for securities fraud that carries a 25-year maximum. 

The U.S. Securities and Exchange Commission is busy writing the thousands of pages of regulations to implement Sarbanes-Oxley - red tape that will raise the costs of regulatory compliance. 

U.S. Congressman Michael Oxley, an Ohio Republican, one of the law's sponsors and a Davos participant, said initial concerns from European executives that the law imposed burdensome U.S. ways on foreign companies were easing. 

The SEC rules have been softened to permit foreign companies to argue the case that their home countries' laws are solid enough for them to list their shares in the United States. 

"I think the angst is largely easing,'' Oxley said. 

Still, Sarbanes-Oxley exposed a divide between Europeans and Americans, with the U.S. side more willing to agree to new regulation and revamped management structures - though they mostly think Sarbanes-Oxley law is enough added regulation for now. 

For instance, J.T. Battenberg III, the head of U.S. auto supplier Delphi Corp., ticked off specific ways to strengthen the oversight of executives by boards of directors. 

"We need a drastic, radical movement to independent outside directors selected by the board without management,'' Battenberg said. 

He paused to note that of the 17,000 public companies in the United States, it was only "15 or 20 that have cause us great embarassment.'' 

Brabeck-Letmathe from Nestle countered with the more European view that reshuffling boards and rules wasn't the way. 

"If I have to handle 3,000 pages of regulations, I am in big danger of forgetting about running the business... There are risks here, bureacracy costs that haven't been stressed,'' he said. 

Better, he said, would be reducing short-term pressure from stock market analysts and investment funds to pump up quarterly earnings at the expense of long-term strategy - pressure that contributed to the corner-cutting in the U.S. scandals. 

Samuel A. DiPiazza Jr., global head of auditor PricewaterhouseCoopers, had to disappoint Brabeck-Letmathe by warning him that 3,000 pages was only the first installment of Sarbanes-Oxley rules. 

"Let's face it, the U.S. model is one of deep regulation and specificity, and you're not going to get away from that,'' DiPiazza said, noting that it took 75 pages just to define "financial expert.'' 

Still, while the "tough medicine'' from legislators was appropriate, he added, "You can have rules against people robbing banks and people still rob banks. ... You're not going to fix the problem with regulations.'' 

Others offered even broader definitions of the ethical corporation. Charles O. Holliday Jr., head of chemical firm DuPont USA, said three other groups had to be considered along with shareholders: customers, employees, and the community. 

Strong efforts on job safety and the environment, he said, builds the trust corporations need to have. 

"It's not really a tradeoff,'' he said. "If you do a good job on the first three, you'll do a good job for your shareholders.'' - AP 

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