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How’s Business? Corporate reform

By Joe Palumbo III

But does this really solve the problem? A large part of investor uncertainty today really does not revolve around rampant corporate fraud. Rather, it arises out of the surprising disintegration of household names such as Enron, WorldCom, Global Crossing, Adelphia Communications and the like. These entities were corporate giants who let us down in a big way.Many of these companies once commanded stock valuations in excess of $60 a share, but now have become nothing more than penny stocks. It's easy to blame these collapses on incompetent or crooked CEOs, who should pay their price legally in criminal court or in monetary reparation for the millions taken. But the problems run much deeper that. The root of the problem is an overall environment of misguided incentives with a lapse of personal responsibility, compounded by general systematic failure. CEOs should be compensated based on performance, rather than on promises, reputation or past success. Further, the government should refrain from regularly tinkering with the economy, the way it did when interest rates were increased, because the belief was Americans were becoming too wealthy. If you mess with the switch too much, you will wind up damaging it.So how's business with regard to corporate reform? I am in favor of the Theodore Roosevelt policy. Speak softly, that is, let business and the economy flow concurrent with the climate. And carry a big stick, that is, punish and set an example for those who abuse the system by cheating the shareholders and hard working employees.Joseph J. Palumbo III is a managing partner for the Palco Group. The Palco Group deals in asset management, real estate, sales training and business consultation. Palumbo can be reached at 718-461-8317, or at [email protected].