A Minnesota Public Radio - Pioneer Press poll (See poll) conducted last week found that only about half of Minnesotans believe business leaders generally act in an ethical manner. The poll also found about half --54 percent-- say their opinion regarding the ethics of business leaders has gotten worse in the past year. The poll was taken last week as fraud charges were brought against former Tyco executives. Last July, amid a wave of accounting scandals, Congress passed a slate of new laws designed to prevent corporate misbehavior. Experts disagree on whether the new regulations will be effective.
On July 30, President Bush signed into law the Sarbanes - Oxley Act. The legislation requires top executives at public companies to certify the accuracy of their firm's financial results. The new law also forbids companies from making loans to their executives and prohibits company auditors from providing non-audit consulting services.
These rules and others are still being phased in, but Ed Adams, a corporate lawyer and a professor of law at the University of Minnesota, says they may have only a marginal effect.
"The laws that exist today, in many ways, prior to Sarbanes-Oxley, are very very effective in preventing fraud," says Adams. "I think it adds another layer, and it's positive from that perspective, but does it change the landscape if people really want to commit fraud?"
Adams doesn't think so.
He says people will continue to commit financial crimes regardless of these new laws. But others contend the new legislation is making a significant difference as corporations review the new requirements.
Mark Kimball, senior vice president of Plymouth-based Select Comfort, says his company is currently working to comply with the new rules and regulations. In the process, Kimball says top executives have realized it's best to ensure the company obeys the spirit as well as the letter of the law.
"That's one of the problems we have seen that's contributed to the current climate out there in terms of a lot of accounting abuses, is because -- in our view -- the accounting profession has become more rules based than principals based. So in our decision making processes, we try to go back to what are the principals that should govern our decision," according to Kimball.
Principals and ethics are also on the minds of business students preparing to enter the corporate world.
David Ehlen, a second-year student at he University of Minnesota's Carlson School of Management, says he and his classmates have taken at least one major lesson from the corporate scandals.
"Not only from an ethical standpoint, but this sort of behavior gets you nowhere from an economic standpoint either. That's really the point that I'm getting from all of the scandals, that sooner or later it will catch up to you," says Ehlen.
Some say the all-consuming focus on profits was the root of the problem that created the corporate scandals.
"Every piece of legislation passed so far has been about shareholder protection. And so we're still playing the same game, which is the shareholders are the only ones that matter," says Marjorie Kelly, editor and publisher of Business Ethics Magazine, a Minneapolis-based publication that promotes socially responsible business practices.
The magazine, along with many other proponents of socially responsible business, had once praised Enron for an ethical culture and enlightened policies on the environment and human rights.
But now after the Enron scandal, Kelly says the company was simply a machine built to make money. She says the scandals at Enron, WorldCom and other companies only confirmed her long-held belief that communities and employees need to be as much a focus for corporations as are profits.
"If you have a company that is totally focused on just one thing, which is share price, what happens? Well what happens is: everybody gets stepped on, all of the rules get broken and in the end it implodes. A system designed to do only one thing is an unstable system. It's like driving a car only for maximum speed. You're going to crash, of course your going to crash," she says.
Enron and the other accounting scandals have been a major factor in the stock market's decline this year.
Nearly half of respondents to the MPR-Pioneer Press poll said the recent corporate scandals have made them less likely to invest in the stock market.
The poll of 625 registered Minnesota voters has a margin of error of plus or minus four percentage points.More from MPR