Chapter Six, Part V

The social benefits of trust and cooperation are, at this point, relatively unquestioned. But they do create a problem: the more people trust, the easier they are for others to exploit. And if trust is the most valuable social product of market interactions, corruption is its most damaging. Over the centuries, market societies have developed mechanisms and institutions that are supposed to limit corruption, including auditors, rating agencies, third-party analysts, and, as we’ve seen, even Wall Street banks. And they have relied, as well, on the idea that companies and individuals will act honestly—if not generously—because doing so is the best way to ensure long-term financial success. In addition, in the twentieth century a relatively elaborate regulatory apparatus emerged that was supposed to protect consumers and investors. These systems work well most of the time. But sometimes they don’t, and when they don’t, things come apart, as they did in the late 1990s.

The stock-market bubble of the late nineties created a perfect breeding ground for corruption. In the first place, it wiped away, almost literally, the shadow of the future for many corporate executives. CEOs who knew that their companies’ future cash flow could never justify their outrageously inflated stock prices also knew that the future was therefore going to be less lucrative than the present. Capitalism is healthiest when people believe that the long-term benefits of fair dealing outweigh the short-term benefits of sharp dealing. In the case of the executives at companies like Enron and Tyco, though, the short-term gains from self-interested and corrupt behavior were so immense—because they had so many stock options, and because their boards of directors paid them no attention—that any long-term considerations paled by comparison. In the case of Dennis Kozlowski, the CEO of Tyco, for instance, it’s hard to see how he could have made $600 million honestly if he had stayed CEO of Tyco. But dishonestly, it was remarkably easy. Investors should have understood that the rules of the game had changed, and that the incentives for CEOs to keep their promises, or to worry about the long-term health of their businesses, had effectively disappeared. But they didn’t, and because they were so intoxicated with their bull-market gains, they also stopped doing the due diligence that even trusting investors are supposed to do.

At the same time, the mechanisms and institutions that were supposed to limit corruption ended up facilitating corruption rather than stopping it, The business of Wall Street and the accounting industry is supposed to be to distinguish between the trustworthy and the trustworthless, just as the Underwriters Laboratory distinguishes between safe and dangerous electrical equipment. If Goldman Sachs underwrites a stock offering for a company, it’s saying that the company has real value, as is Merrill Lynch when one of its analysts issues a buy recommendation. If the New York Stock Exchange lists a company, it’s attesting to the fact that the firm is not a fly-by-night operation. And when Ernst and Young signs off on an audit, it’s telling us that we can trust that company’s numbers.

We are willing to believe Ernst and Young when it says this because its entire business seems to depend on its credibility. If the Underwriters Laboratory started affixing its UL mark to lamps that electrocuted people, pretty soon it wouldn’t have a business. In the same way, if Ernst and Young tells us to trust a company that turns out to be cooking the books, people should stop working with Ernst and Young. As Alan Greenspan has said of accountants, “The market value of their companies rest[s] on the integrity of their operations.” So accountants don’t have to be saints to be useful. In their self-interest alone will compel them to do a good job of separating the white hats from the black. But this theory only works if the firms that don’t do a good job are actually punished for their failure. And in the late nineties, they weren’t. The Nasdaq listed laughable companies. White-shoe firms such as Goldman Sachs underwrote them. The accountants wielded their rubber stamps. (Between 1997 and 2000, seven hundred companies were forced to restate their earnings. In I98 1,just three companies did.) But none of these institutions paid a price in the marketplace for such derelictions of duty. They got more business, not less. In the late nineties, Arthur Andersen was the auditor of record in accounting disasters like Waste Management and Sunbeam. Yet investors chose not to look skeptically at companies, such as WorldCom and Enron, that continued to use Andersen. In effect, investors stopped watching the watchmen, and so the watchmen stopped watching, too. In a world in which not all capitalists are Quakers, trust but verify remains a useful byword.

Next section

Previous section

6 comments:

  1. The metal has gained more than 1 percent so far this week. capitalstars

    ReplyDelete
    Replies
    1. ASS.WR.WT.SAYA IBU WINDA TKW SINGAPURA sangat berterima kasih kepada AKI SOLEH, berkat bantuan angka jitu yang di berikan AKI SOLEH, saya bisah menang togel 4D yaitu ((( 6 6 3 4 ))) dan alhamdulillah saya menang 150 lembar.sekarang saya sudah bisah melunasi hutang-hutang saya dan menyekolahkan anak-anak saya. sekarang saya sudah bisah hidup tenang berkat bantuan AKI SOLEH. bagi anda yang termasuk dalam kategori di bawah ini;

      1.di lilit hutang
      2.selalu kalah dalam bermain togel
      3.barang-barang berharga sudah habis buat judi togel
      4.hidup sehari-hari anda serba kekurangan
      5.anda sudah kemana-mana tapi belum dapat solusi yang tepat
      6.pesugihan tuyul
      7.pesugihan bank gaib
      8.pesugihan uang balik
      9.pesugihan dana gaib, dan dll
      dan anda ingin mengubah nasib melalui jalan togel seperti saya hub AKI SOLEH di no; (((082-313-336-747)))
      atau anda bisah kunjungi blog AKI KLIK--->DISINI ((((( BOCORAN--->TOGEL--->HARI--->INI ))))

      UNTUK JENIS PUTARAN; SGP, HK, MACAU, MALAYSIA, SYDNEY, TOTO MAGNUM, TAIPE, THAILAND, LAOS, CHINA, KOREA, KAMBODIA, KUDA LARI, ARAB SAUDI,
      AKI SOLEH dengan senang hati membantu anda memperbaiki nasib anda melalui jalan togel karna angka gaib/jitu yang di berikan AKI SOLEH tidak perlu di ragukan lagi.sudah terbukti 100% akan tembus. karna saya sudah membuktikan sendiri.buat anda yang masih ragu, silahkan anda membuktikan nya sendiri...
      SALAM KOMPAK SELALU.DAN SELAMAT BUAT YANG JUPE HARI INI

      Delete
  2. Puji syukur saya panjatkan kepada Allah yang telah mempertemukan saya dengan Mbah Rawa Gumpala dan melalui bantun pesugihan putih beliau yang sebar 5M inilah yang saya gunakan untuk membuka usaha selama ini,makanya saya sengaja memposting pesang sinkat ini biar semua orang tau kalau Mbah Rawa Gumpala bisa membantuh kita mengenai masalah ekonomi dengan bantuan pesugihan putihnya yang tampa tumbal karna saya juga tampa sengaja menemukan postingan orang diinternet jadi saya lansun menhubungi beliau dan dengan senang hati beliau mau membantuh saya,,jadi bagi teman teman yang mempunyai keluhan jangan anda ragu untuk menghubungi beliau di no 085-316-106-111 rasa senang ini tidak bisa diunkapkan dengan kata kata makanya saya menulis pesan ini biar semua orang tau,ini sebuah kisa nyata dari saya dan tidak ada rekayasa sedikit pun yang saya tulis ini,sekali lagi terimah kasih banyak ya Mbah dan insya allah suatu hari nanti saya akan berkunjun ke kediaman Mbah untuk silaturahmi.Wassalam dari saya ibu Sartika dan untuk lebih lenkapnya silahkan buka blok Mbah disini đź’‹Pesugihan Putih Tanpa Tumbalđź’‹

    ReplyDelete
  3. ASSALAMU'ALAIKUM.WR.WB.
    ALHAMDULILLAH..!!
    saya bersyukur kpd Allah SWT.
    atas keberhasilan PENARIKAN UANG
    GHAIB.setelah melalui proses panjang &
    sangat sangat beresiko,dgn izin Allah
    alhamdulillah uang ghaib akhirnya berhsil
    kami keluarkan dgn jumlah yg luar biasa.
    UANG GHAIB INI PENAWARAN TERBARU DARI KAMI.
    setelah uang balik (UB) sudah terbukti keberhasilanya,
    dan sehubungan banyaknya orang yang menginginkan hal ini
    ( UANG GHAIB ), kami sanggup memproses penarikan UANG GHAIB,
    dngan catatan:
    1.masalah utang piutang (JUMLAH BESAR)
    2.tidak untuk memperkaya diri
    3.sanggup menyiapkan satu ekor sapi jantan,(sebagai pengganti tumbal)
    --------------------------------------------------
    bagi anda yang BENAR-BENAR SERIUS dalam hal ini.....
    silahkan menghubungi (PAK SUGENG ) DI NMR
    ( 082-315-999-679 )
    atau Atau klik disini
    Atau mau di bantuh togel 2D 3D 4D 5D 6D di jamin 100% tembus

    ReplyDelete
  4. Such a blind believe on Ernest and Young just on the basis of their credibility? I think credibility does play a part but so does luck. No one should play according to what others say but have little faith in themselves as well when it comes to money and decisions.

    ReplyDelete
  5. eToro is the #1 forex trading platform for beginning and advanced traders.

    ReplyDelete