First it was Enron. Then Arthur Andersen. Then Tyco, WorldCom, and Adelphia, followed by Merrill Lynch, Salomon Smith Barney, J.P. Morgan Chase, and on and on. It seems every accounting firm, every rating agency, and every investment bank has faced allegations of fraud, self-dealing, or gross excess. Even Dick Grasso, who as head of the New York Stock Exchange had been leading a charge for reform, resigned in disgrace over his enormous retirement package. And now mutual funds, long considered pillars of integrity, are under investigation for late trading and market timing (see "Subject to Failure"). At this point, no corner of Wall Street is unscathed by scandal, and much of Corporate America still struggles with the fallout from the past two years.
Obviously, it's way past time to ditch the "bad apple" theory to explain why so many people cheat to obtain more money for themselves. Perhaps instead, as economist Lester Thurow suggested to finance executives in a recent speech at the Massachusetts Institute of Technology, we should look at greed as the inevitable byproduct of capitalism, or even the fuel that drives it. This is not to condemn capitalism or advocate socialism. But maybe we should acknowledge that greed powers the capitalist impulse as gasoline powers the combustion engine, and, like gasoline, has noxious properties that must be monitored.
Like it or not, one of the chief monitors must be the CFO. Whether called in to help mop up the damage in the wake of massive fraud, like Vanessa Wittman (see "Adelphia Comes Clean"), or forced to figure out how to protect pension and 401(k) assets, finance executives serve as fiduciaries as well as business partners. And never has the fiduciary role been more important.