The New Problem of Corporate Accountability

Businessweek has a nice piece on the new atmosphere in Corporate America, and asks a serious question:

The question is whether the increased vigilance comes at the expense of long-term strategic planning. At Allstate Corp., CEO Edward M. Liddy says that he has to work harder than ever to meet his commitments. "I do worry that there's a little more focus on the internal control environment and the short term and perhaps less of a focus on the long term," he says.

Are Corporate America's leaders drowning in unnecessary details? It's too early to tell. But it isn't too soon to declare one casualty of the new legal climate: the figurehead CEO, the corporate celebrity who leads charities, hobnobs with politicians, and delegates the minutiae to somebody else. Lay exemplified this type of manager. While Jeffrey K. Skilling ran the company, Lay circled the globe in corporate jets and lobbied in Washington for energy deregulation.

In some ways I agree. I don't think CEOs should have to sign off on financial statements. They aren't auditors and it isn't their job to certify that everything is correct. They shouldn't be bogged down in details that should be taken care of by the front-line managers. But they are still accountable because ethics, culture, and attitude come from the top. The biggest change that could be made is to encourage whistleblowers and reward those who point out the shortcuts some will take to make earnings look good.

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