Corporate Deception and Fraud
The Case for an Ethical Apologia
KEITH MICHAEL HEARIT
Few ideas are more remarkable than the collective historical amnesia that accompanies a bubble economy. Like the tulip bubble that created a highly speculative financial environment in the seventeenth century in Holland, or the go-go years of the late 1920s on Wall Street, the information technology bubble of the late 1990s brought about stupendously high valuations of companies that had little or no earnings, but because of a valuable Internet domain name (e.g., www.pets .com), such companies were expected to change the nature of commerce in the twenty-first century. Correspondingly, technology firms were projected to dominate this competitive landscape over more traditional “bricks and mortar” businesses, creating all kinds of advertising and revenue “synergies.” The example that most accurately supports this point is the failed merger of AOL Time Warner, in which an overvalued Internet service provider with 23+ million subscribers was able to purchase the venerable media giant—the proverbial fish that swallowed the whale. Since the merger, AOL CEO Steve Case has resigned and the company has considered ways to spin off the AOL portion of the business.
Yet the collapse of the bubble economy, and the tremendous sense of financial loss of so many, led Americans (and media) to seek those who were responsible for the failure. To this end, a number of scapegoats were offered: Ken Lay and Jeffrey Skilling at Enron, Dennis Kozlowski at Tyco, Gary Winnick at Global Crossing, and David Duncan and the entire Arthur Andersen accounting firm. Even America's domestic doyenne, Martha Stewart, was accused of insider trading and subsequently convicted of lying to investigators and obstruction of justice. Each new disclosure, whether it was accounting gimmicks embedded in offshore corporations or old-fashioned insider trading, left the suspicion for many individual investors and holders of 401(k)s (which one commentator had remarked had become 201(k)s by the time it was all over) that the game was rigged; and to reference an old Wall Street story, the Wall Street professionals were buying yachts while individual shareholders had precious few assets to show for their many trades. The underlying causes that connected these disparate cases are the triumph of free market fundamentalism, the cult of the CEO as savior, and the ideological leitmotif that pervades contemporary corporate discourse that suggests that fundamentally new and different approaches to business are necessary if companies are to remain competitive in the new global economy (Conrad, 2003).
At root, there really are only two metaapproaches that account for the social responsibility of the modern corporation. The first, the classical approach, argues that organizations have an obligation only to their shareholders (Friedman, 1962, 1970), and they “do good by doing well.” The second, the so-called stakeholder ap-