Wolf notes that the huge amounts of money taken by executives from companies during the 1990s partly reflects the stock market bubble. However he believes it also reflects failures in corporate governance.
"Alan Greenspan, chairman of the Federal Reserve, has called what happened "infectious greed". I prefer "obscene". An investigation by the Financial Times concluded that top executives had extracted $3.3bn from companies they led into bankruptcy. These barons of bankruptcy are extreme examples
"But bad behaviour has been pervasive. It has embraced: the grant of stock options with no relation to performance; subversion of accounting standards and audits; and a host of value-destroying takeovers. At least a third of takeovers begun in the bull market have now been unwound. This is, alas, no concern to the dealmakers. Investment bankers take their money on the way in - and out."
What can be done? Wolf believes only limited changes are politically possible, which are:
"It is to restrict the extent of capture by top management. There needs to be sane treatment of accounts, independent audits and more pressure on intermediaries to act in the interests of beneficiaries. The answers will never be perfect. That is no excuse for continuing with business as usual."
posted by Matthew @ 11/20/2002 10:15:00 AM
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