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

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."

At both the national and state level, Grasso indicated, is emerging a public-private partnership, much like the one that successfully dealt with the aftermath of 9/11, restoring trading in four days -- a task most thought would take months. That type of system is in the final stages of producing what he describes as a "new paradigm in financial services."

Grasso is optimistic. "As challenged as our economy may be, it is still the strongest on earth, and it is the economy that will lead global economic expansion."

Eliot Spitzer, New York State Attorney General, provided what he dubbed "remarkable numbers that speak to some of the issues in corporate America:" In 1980, the ratio of average CEO compensation to the average workers' compensation was 42-to-i. By 2001, the ratio had exploded to 411-to-1.

"I don't think there is any rational way you can state that CEOs have multiplied their value [tenfold] in ratio to the average worker," said Spitzer, adding that these numbers clearly indicate "a problem that results when you have a society that permits that to happen."

Over the last 10 to 15 years, he said, there has been a change in the corporate conscience -- a "diminution in values, diminution in the expectations of living up to values, and consequently, over time, when things were apparently as easy as they seemed to be, people's behavior began to change." The question we're all asking today, he said, is: what is the answer to that? Answering his own question, he suggested that Tom Wolfe's book, Bonfire of the Vanities, be required reading for anyone who gets a job in an accounting firm or a board of director position or who graduates from business or law school.

"If there was ever a book that defines what happens when you think you've become a master of the universe, and how quickly, with one wrong turn into a neighborhood you don't know, you suddenly find yourself in a different world -- that should pierce that balloon of invincibility that's surrounding too many folks now," said Spitzer.

He explained his thinking that during the past decade we had a kind of "imperial CEO" -- because the links in the chain of corporate decision-making failed, and they all failed simultaneously, from the board to the audit committee, to the institutional shareholder, investment bankers and the lawyers. He sees good news ahead, however: "We have tried to resurrect and create a new legal environment, a new set of obligations for each one of these links. Whether we succeed or not, we won't know for some period of time."

Spitzer offered three steps to restore investor confidence. First, change the structural rules. Secondly, deal with the issue of restitution for shareholders, which is in process and will continue over time. The third step is "to take those individuals who know they misled and make them pay the price."

It will take some time to work those cases through the system, he added, but that trilogy of objectives needs to be integrated into some overall reform package.

Following lunch at The Conference Board program, former President William Jefferson (Bill) Clinton was interviewed by Marvin Kalb, Senior Fellow, Joan Shorenstein Center on the Press, Politics and Public Policy, John F. Kennedy School of Government, Harvard University. What follows is a capsule of this reporter's notes of Clinton's comments:

* On Sarbanes-Oxley and other Bill Clinton regulation to help restore investor confidence: [I'm] skeptical when people say laws don't make a difference. I think they do.

* On the corporate trust situation: This is serious, what we're going through. [Yet] there has never been a problem-free era. If we don't have problems, we'll make up some.