CORPORATE GREED

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CORPORATE GREED

To fully understand how the business culture has acquired the greed mindset, a look at what a corporation is and defining corporate behavior becomes the starting point. First a corporation is defined as "an association of individuals, created by law and having an existence apart from that of its members as well as distinct and inherent powers and liabilities (Webster Dictionary)." Although made up of people, being separate or apart from its members also equals unaccountability. The question of "who pays when a company goes under" is at the forefront of discussions today. Corporations are developed to serve society, meet a need or provide a service. Over the years, however, the good intentioned corporation has evolved into a greed machine that has lost site of the community that it serves and the people employed who ultimately perform the work. The steady parade of top executives confessing to engage in price gouging, tax dodges, accounting shams, employee rip-offs, and other shady unacceptable acts are coming to light daily. Unethical and illegal practices are documented from the RJR Nabisco scandals in 188 to today's Enron, WorldCom, Merrill Lynch, Arthur Anderson, Xerox, and endless other corporations. The world realizes now that corporate greed is not about one-bad company, but large companies in general that have adopted unacceptable guidelines for corporate behavior and an overall attitude that greed is acceptable.

The bottom line, insatiable need for growth, amoral corporate behavior, expendable and exploitation of employees, and the corporate culture of classes have all led to the current issues of corporate greed that is running rampant throughout companies today (Corporate Power, retrieved April 6, 00). The first rule of corporate behavior is the bottom line. Nothing else matters except the profit, it is above all else, the measure of whether or not the top executive is performing. Secondly, growth matters. Executive success is measured by how a company grows. Amoral corporate behavior is the third aspect of declining company culture. Employees are pitted against each other and compete in an atmosphere of "just get the job done we don't care how". Companies have reduced themselves to dehumanizing and exploiting the worker as they adopt the attitude that the employee is an expendable commodity in their big machine. Although the worker gets paid a wage, the owner gets the benefit of their labors, plus the surplus profit that has been produced (Corporate Power, retrieved April 6, 00). The last aspect of corporate behavior that has contributed to the corporate greed mindset is the hierarchy structure of the company. Corporate culture is divided into classes, the haves and the have-nots. The haves have all the power, the exceedingly obscene salaries, the balloon parachutes, while the have-nots do not reap any of those benefits and are subject to employee corporate downsizing whenever the numbers are at risk for a company. These behaviors have slowly deteriorated corporations and are present in those companies at the forefront of the news today. The underlying ethic of greed has surfaced to define corporate success, and is now the underlying catalyst for corporate failure.

The RJR Nabisco $4 billion takeover shocked the nation and illustrates a perfect example of corporate greed. Chief Executive Officer, Ross Johnson, was the model of a modern business hero and is a perfect example of unethical corporate behavior. Hope Lampert (True Greed, 10) exposes Johnson as "a charismatic leader and the embodiment of the new non-company man, who focused strictly on the bottom line without sentimental attachment to people, products, or places." His behavior focused totally on ensuring that he came out on top. Johnson already had a history of profitably selling companies. In 188 he proposed initially that RJR Nabisco sell for less than it was worth, all the while knowing that he stood to make $00 million on the deal (Lampert, 10). Six weeks after his proposal, Johnson, who had been considered one of the most talented executives in America, became the epitome of true greed. The buy-out of this huge corporation exposed many executives that also fit the "corporate greed" definition. Possibly this was one of the first instances where the public became totally aware of the excesses of corporations. The production of a movie based on the buyout aided in the universal awareness of CEO wheeling and dealing behind the scenes. Today, the public furor over corporate greed and irresponsibility is at an all time high. It seems that companies are being exposed daily. Enron and WorldCom are two additional companies that are under public scrutiny and have further exposed the unreliability of corporations.

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Pick up any paper or business magazine today and Enron will be mentioned somewhere. It is the best example of a culture built on greed and deception to date and it will take years for the courts to determine who and what are to blame for the collapse. According to an article in Business Week, the off-balance-sheet, the mark-to-market accounting practices, and the money losing-badly run businesses around the world all led to the ultimate demise of Enron (Zellner, 00). The unethical practices in these three areas of running a business all clearly point to corporate greed at its best. According to Zellner (00), the off-balance-sheet financially aided Chief Financial Officer, Andrew S. Fastow and his cohorts while hiding Enron's deteriorating financial state. Add to that the easily manipulated "mark-to-market accounting practices that let Enron book revenue upfront on a long-term deal instead of spreading it out over years and you have created a false stream of information that completely alters the state of the company (Zellner, 00). Falsely reporting activities of the company is not only misleading to the stockholder, the public, and the employees that invest in the company, but in this case, it led to corporate disaster. The evidence of Enron's corporate greed has left the employees who lost their life savings and investments made in a company that they were led to believe was healthy, asking, "Who will pay for this deception?" Clearly the top CEO's were aware of the trouble and went to great lengths to cover it up. Follow-up questions are directed toward the accounting firms that are responsible for auditing the corporation. The unethical accounting practices should have been caught and disclosed by the accounting firms reviewing the books. These firms, Pricewaterhouse to name one, are under the spot light as well. Inappropriate financial reporting should have been obvious. As a result, the avalanche of corporate greed is headed for the accounting firms as well. After all, Arthur Anderson audited Enron's books, and Pricewaterhouse Cooper audited Tyco's books (Byrnes, 00). How does a company as reputable as PwC fail to catch the looting of $600 million by Chief Executive Officer C. Dennis Kozlowski and others from its investors? Additionally, how will Arthur Anderson explain their document shredding and the accounting practices of Enron? Exactly where the auditing firms stand in these business malpractice issues is another part of corporate greed. The accounting firm that accurately reports unethical accounting practices is possibly cutting off the hand that is paying them. Enron's corporate greed has been documented in several books. However, Googins' analysis reported in Brian Cruver's book "Anatomy of Greed" clearly illustrates the position that the company finds itself in today. He quotes,

When the house of Enron came tumbling down, it exposed the worst of corporate greed, misbehavior and citizenship. Enron betrayed its employees, it betrayed its clients, and, by inflaming the public's widely perceived notion that corporations cannot be trusted to do anything other than serve their own ends and line their own pockets, Enron betrayed all of corporate America. (p. xii)

Truly, the total disregard of ethical behavior is apparent in the activities of Enron's top executives. Another book, "Power Failure" by Mimi Swartz, address the activities that led to the collapse of Enron. Sherron Watkins is reported to be the catalyst that started the corporate tap-dancing to cover up inappropriate accounting practices. She was a vice president for Enron who interacted with all of the major players and reported to them discrepancies that she felt needed to be corrected. From 1 to 00, Enron's stock prices rose and fell like a roller coaster ride. Beginning in 1 the price of one share was $1.50, and reached its highest price of $0 a share in 000, before ultimately claiming bankruptcy (Swartz, 00). At the heart of Enron's fall is Andy Fastow whose deal-making, trader-oriented culture ultimately changed Enron's finance department. Mimi reports "Fastow transformed Enron's finance department into a 'profit center,' creating a honeycomb of financial entities to bolster Enron's 'profits,' while diverting tens of millions of dollars into his own pockets" (Swartz, 00). This is the clearest example of corporate greed and meets the definition exactly. Greed exists when executives knowingly disclose erroneous information that defrauds ordinary shareholders. Enron is not alone. Another corporate example is WorldCom.

WorldCom was a true success story about a company that grew from a tiny business in Mississippi into a 0-million customer global telecom superpower. However, millions of people around the world wondered how a company where the stock value had skyrocketed 7,000 percent in the 10s could fall so hard and so fast (Jeter, 00, p. xxi). The answers were apparent as the accounting scandal became public. Top WorldCom executives were meeting behind doors, scrambling to justify improper journal entries that totaled nearly $4 billion. As the investigation progressed unsuspecting employees and investors in the company found out that the earnings in 001 had been artificially boosted to impress shareholders and Wall Street. WorldCom filed the world's largest bankruptcy claim in corporate history. The nation's second largest long-distance provider, the largest competitive provider of local telephone services, the largest carrier of international traffic, and the world's largest Internet carrier with operations in some 100 countries on six continents had spiraled to its financial death (Jeter, 00). Greed was at the forefront of the decision making with this company also. Crafty account reporting helped to make the books look better. It was disclosed that one of the practices by WorldCom to make revenue look good was to record revenue from an account even it had fallen in arrears. WorldCom continued to book the revenues as if the customer had paid the debt. "By 1, WorldCom had accumulated more than $600 million in uncollectible receivables on its books" (Jeter, 00, p. 15). Deliberate falsifying of income skews the books and deceives the shareholder and the public into believing that the company is in better financial condition then it is, which translates to corporate greed. Here again, we clearly see an example of corporate greed where executives knowingly disclose erroneous information that defrauds people.

Upton Sinclair hits the nail on the head so-to-speak in this quote, "It is difficult to get a man to understand something when his salary depends on his not understanding it" (Berenson, 00). As the ongoing analysis of corporate America continues it is apparent that corporate greed is the common thread that connects companies like Enron, Tyco, WorldCom, and numerous others. The facts are that publicly traded companies report sales and profits to their shareholders and the public on a quarterly basis. The pressure for that report to be profitable is key to company success. Top executives have lost site of what is right and it has caused devastating results across corporate America. Alex Berenson has put the last three years of accounting fraud and corporate greed in context as he describes how the past decades of lax standards and shady practices have contributed to our current economic troubles (Berenson, 00). Top chief executive officers that run these large companies are compensated well. As the quote at the beginning of the paragraph suggests, it is difficult to blow the whistle when your own pocketbook will be financially affected. An article retrieved from the Internet discloses that corporate executives in America were paid an average of $.5 million each in 181, and 1 years later, top CEO's are paid an average of $154 million ("Corporate America's", retrieved 00, April 0). It is hard to accept that the work done warrants 4% higher pay for the services of a chief executive officer. Clear examples of corporate greed become obvious when newspapers report that thousands of employees lose their jobs but the chief executive officer has a "golden parachute" that has compensated him in the millions regardless of the company's income statement. Enron's chief executive office, Kenneth Lay, hid more than a billion dollars in debt from investors without going to jail ("Corporate America's", retrieved 00, April 0). At WorldCom, 17,000 jobs were lost, profits were overstated by $.8 billion, and their accounting fraud cost shareholders some $150 billion (Sanders, retrieved April ,00). The question of what to do about corporate greed is at the forefront of discussions today. Most likely it will become a campaign issue for those running for President in our upcoming election. Greed is excessive desire, and drawing the line between legitimate compensation and excessive is clearly confusing. Corporate greed then is the means by which the compensation earned has been achieved. It is the behavior that should be measured that will define excessive. Corporate greed occurs when lies, cheating, and stealing are done in the name of company progress. Financial success alone does not equal corporate greed, but when millions are generated falsely by fraud, that is greed and someone should pay for it.

References

Byrnes, N. (00, October 14). Is the avalanche headed for Pricewaterhouse? Business Week, pp 45 46.

Corporate America's top chief executive officers of July 000". Retrieved April 0, 00 from

http//www.fdungan.com/stickhtm.

Corporate power. (n.d.). Retrieved April 6,00,from http//www.spiritone.com/gy5150/cpg.htm.

Cruver, B. (00). Anatomy of Greed. New York Carroll & Graf Publishers.

Jeter, L. (00). Disconnected deceit and betrayal at Worldcom. New Jersey John Wiley & Sons, Inc.

Lampert, H. (10). True greed. New York New American Library.

Sanders, B.(n.d.). We must stop the culture of corporate greed. Retrieved from

http//bernie.house.gov/documents/opeds/00071118147.asp.

Scannell, K. (00, April 17). WorldCom ex-chief of finance faces new bank fraud charges.

The Wall Street Journal, p. 8.

Swartz, M., with Watkins, S. (00). Power Failure. New York Doubleday.

Zellner, W. (00, October). The deadly sins of Enron. Business Week, pp. 6 8.

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