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Wednesday, July 24, 2002

By Pamela R. Winnick, Post-Gazette Staff Writer

As each day seems to bring news of yet another corporate scandal and as the stock market continues its downward spiral, the public, Congress and President Bush are all clamoring for reform.

Just what type of reform, and how it will all shake out, remains to be seen.

If Diane Swanson has her way, lawmakers would go after the people at the top, capping the earnings of chief executive officers, barring them from also serving as chairmen of their companies' boards and ensuring that rank-and-file workers also serve on boards.

"Corporations are out of whack at the top," said Swanson, a Pittsburgh native and business ethics expert. "For two decades, American culture has made heroes out of CEOs."

Swanson will be returning to her hometown tomorrow for a week to meet with colleagues at the Katz School of Business at the University of Pittsburgh, where she graduated in 1996, and with others from Carnegie Mellon University and the A.J. Palumbo School of Business Administration at Duquesne University to discuss with them legislative and educational reforms.

She's hardly alone in her concern for corporate reform. Congress is considering reforms to curb accounting abuses, stiffen penalties for corporate fraud and make it regulators to levy fines and other penalties against executives and directors who commit wrongdoing.

Federal Reserve Board Chairman Alan Greenspan recently criticized corporate executives for placing stock options ahead of responsibilities to shareholders and said Congress and regulatory agencies share some of the blame for their failure to oversee corporate excess.

President Bush likewise has vowed to institute measures to curb corporate abuse, including increasing the budget of the Securities and Exchange Commission.

Swanson sees much of the problem as a laissez-faire attitude of government toward corporations, which she believes was most pronounced during the Reagan administration but has continued well beyond the 1980s.

Still, many of her ideas for reform go far beyond anything proposed thus far.

For one thing, she wants Congress to cap CEO earnings by placing some form of multiplier on their annual pay in line with the earnings of an average employee.

She'd also like to see legislation requiring that a certain number of directors on a company's board come from the rank-and-file and preventing CEOs from running the board.

"I think reform of corporate boards is going to have to be federally mandated," Swanson said.

"I don't like CEOs serving as chairmen of the board. The chairman of the board should be overseeing the CEO."

Most fundamentally, Swanson, who teaches an ethics course at Kansas State University, wants to see reform in the business schools themselves.

During meetings at Katz, CMU and Duquesne -- all of which, she said, have excellent ethics programs -- she hopes to persuade other business schools to start ethics programs.

"Business schools," Swanson said, "are notorious for bypassing ethical issues."