by Ellen M. Heffes (Financial Executive, June 2003)

Following the spate of corporate accounting scandals, and even before the huge Wall Street settlement was announced, much discussion has centered around the $7-plus trillion in stock market and investor losses: who's to blame, what are the remedies and how to regain investor confidence. The "settlement"--the recent $1.4 billion agreement between regulators and 10 Wall Street firms accused of issuing tainted stock research to investors--seeks to end conflicts of interest between analysts and investment bankers through new rules. In each case, the 10 firms did not admit or deny the charges.

If improving corporate reporting and restoring corporate integrity and public trust involves a wave of new regulations, publications, meetings, broadcasts, conferences and lots of dialogue, we are well on the way.

In one meeting, The Conference Board, in April, gathered together an impressive group that "played" to a full house at the Plaza Hotel in New York. Stakeholders from the various affected communities--the public, private industry, government, regulatory, investment firms, unions and even the professional practices, auditors and lawyers--participated in a variety of panels to exchange views on current developments, political finger-pointing and ideas and expectations on going forward.

One thing is certain: even with this esteemed group of speakers, many questions remain. But, bottom line, one thread running through the conference was the belief that restoring investor confidence is central to improving the U.. economy.

Leon Panetta, Director, The Panetta Institute, opened the meeting by setting the tone: "We believe that we have the strongest free market system in the world. But just as our democracy depends on trust, so does our economy--on the trust of CEOs, boards of directors, the investing public, the public in general. We cannot have a strong economy in this country without the confidence of the investing public."

What follows are some takeaways and quotables:

The problem, he said, is that over the last few years, trust has been badly damaged by a series of scandals and abuses that have hurt the economy, those involved with corporate America and, probably worst of all, hurt the employees of many corporations and the investing public. The conference, he continued, would review the new rules of the game: How do we enforce those rules? What do we do to try to restore confidence? He said the responsibility rests with the New York Stock Exchange and the other exchanges, the Securities and Exchange Commission, the attorneys general, accountants, lawyers, CEOs, directors, workers and the public itself.

Richard A. Grasso, Chairman and CEO, New York Stock Exchange Inc., said, "We live in the most successful free-enterprise experience that the world has ever known," comprised of some 15,000 publicly traded corporations. In the last 20 years, he said, America has gone from a defined benefit to a defined contribution society, and in the last 50 years, we've gone from fewer than 3 million owners of publicly traded companies to more than 85 million owners.

How sad recent problems are, said Grasso, referring to reporting scandals at Enron Corp., Adelphia Communications, Tyco International Ltd. An NorldCom Inc. "If that number were only one, it would e one too many, e-cause the employees of those great companies lost everything. We are in a society that is blessed to have the best and the worst of the free market process," he said.

Besides extolling the market's virtues, Grasso conceded a need to step back and deal with the failures and lessons to be learned. The market today, he explained, is experiencing a "trust discount." It's also in the middle of a war discount and a terrorism discount. The war and the terrorism discounts will evaporate, as the U.S. concludes the exercise in Iraq and agents involved in the 9/11 terrorism on U.S. soil are found and removed from society. The trust discount, he said, "is left to us--those in the business, self-regulating and. legislative communities."

One thing is certain: even with this esteemed group of speakers, many questions remain. But, bottom line, one thread running through the conference was the belief that restoring investor confidence is central to improving the U.. economy.

Leon Panetta, Director, The Panetta Institute, opened the meeting by setting the tone: "We believe that we have the strongest free market system in the world. But just as our democracy depends on trust, so does our economy--on the trust of CEOs, boards of directors, the investing public, the public in general. We cannot have a strong economy in this country without the confidence of the investing public."

What follows are some takeaways and quotables:

The problem, he said, is that over the last few years, trust has been badly damaged by a series of scandals and abuses that have hurt the economy, those involved with corporate America and, probably worst of all, hurt the employees of many corporations and the investing public. The conference, he continued, would review the new rules of the game: How do we enforce those rules? What do we do to try to restore confidence? He said the responsibility rests with the New York Stock Exchange and the other exchanges, the Securities and Exchange Commission, the attorneys general, accountants, lawyers, CEOs, directors, workers and the public itself.