Can the convicted business leaders such as Andrew Ebbers, Scott Sullivan, Jeffrey Skilling, Andrew Fastow, Dennis Kozlowski and more recently Bernie Madoff etc be used to detect the financial irregularities they helped perpetuate? Detecting financial irregularities could be asking for a tall proposition. What about they just coming back (lets say after serving their sentences, if they still can) and get into doing what they can better than arguably the most? Building businesses and running them?
I would think most people would be repulsed with this idea. There are many who have lost their life savings either being directly associated with the companies in the capacity of employees or indirectly as shareholders and bondholders. They would prefer to see these people locked up behind bars for a very long time.
But again an argument can be made that these people could be put to good use. We are currently in a financial turmoil a recession only second to the great depression of 1930s that in the opinion of many economists started due to real estate bubble. As we have seen over the past year many financial institutions have failed and are still failing. Postmortem of the causes point to complex financial instruments packaged and sold in such a fashion that every common investor was inadvertently pulled into them. Above all what escapes logic and wisdom is how these senior executives officially engaged in questionable business decisions/practices that resulted in this debacle. Companies disappeared and government had to step in to rein the economy. The executives of these companies have shuffled themselves around but remained and still remain in power. Except for the fact that everything that happened was perfectly legal, the repercussions have been greater. More people lost jobs and more are losing and billions of dollars in wealth has been wiped out from the economy. Unemployment rates have risen to levels only seen once or twice in the history. So the argument goes. When these executives, who are probably as guilty as any of those that are behind bars for accounting or related scandals can continue to own and run businesses, why shouldn’t the likes of Andrew Ebbers, Jeff Skilling etc do the same?
Lets examine the moral aspects of the suggestion. Morally it does not appear right to have these leaders go back to their business as if nothing happened. The deeper argument goes into whether these people should be treated with the same yard stick that applies to people who have committed crimes against society such as murder, theft, robbery or rape etc. For lack of a better word I will refer to them as non white-collar crimes. Here a differentiation should be made. White-collar crimes such as the ones committed by these convicted business leaders affects societies and communities not just an individual. In terms of effects they have a bigger, wider and lasting impact. Most of the times it even alters how a community/society functions in the long run. Going deeper, the individuals in the society/community that were greatly affected could resort to anti social activities and crime might start to flourish in an otherwise calm and quiet community or neighborhood. At one extreme it could even create individuals who could commit crimes against society such as the ones described above. Bottom line these white-collar crimes are probably worse and have far reaching implications since they tend to have a long-term effect.
Here is the argument against measuring these leaders with the same yard stick of non white-collar crimes. These leaders have defrauded businesses to the tunes of billions of dollars. The affected groups are a mixture of speculators and investors and the argument goes that diversification of these investors portfolios could minimize some of these risks. What about the employees of these companies? Most of them would have stock options, restricted and unrestricted, which ultimately turned worthless once the scandals broke out. Again not everyone’s options are restricted and they were free to choose the portfolio they wanted to invest in. Too bad if they decided to stick to their company’s stock instead of diversifying. In the end the argument could be narrowed down to those employees who had restricted stock options. This could very well be ok since options are “options” and unless you exercise them you have nothing to lose. In this case most of the times they would have become worthless. So the argument goes that few people will be affected with this and even those that were affected would have hedged their losses using diversified portfolios. Most who would lose would be speculators and nobody needs to pity them since they are “Speculators” and gambling with their finances. So the contrarian view says that comparing these convicted leaders of while-collar crimes with convicts of non white-collar crimes would be inappropriate.
Suppose for a moment lets assume that government has a way of keeping a watch on these business leaders once they have served their sentence (A long shot considering the sentences they were handed), then is it safe to let them go about the business? After all what they had to go through (or will go through) in the prison will they venture to go against the law again? Very unlikely, since they are intellectuals and they know and can calculate the odds of not getting caught a second time. On the other hand by letting them do what they can do “best” would likely have richer benefits to the society and the country as whole in the long run. After all in their prime they have built multi billion dollar empires and it is highly likely that they can do the same if given a chance. Which society does not want entrepreneurs especially those that have a track record of building very successful companies? The same cannot be said so convincingly of the people who committed non white-collar crimes. More than likely they might end up behind bars again for some other crime.
What about the comparison of these convicted business leaders with the senior executives and CEOs of the financial institutions of the current recession? By the same token these executives and CEOs might need some oversight to make sure appropriate decisions are being taken in the interest of its shareholders and bondholders. But can they be trusted morally to do so? Past history of recessions and bubble bursts suggest otherwise. But again everyone considers we are in a unique recession and its impacts have been so far reaching that the lessons being learnt will ensure no repeats. The current financial strain has brought the world to its knees and it is in nobody’s interest to go through the pain again. So it is possible that morally and ethically we can expect these CEOs and senior executives to make conscious efforts to steer clear off the bad decisions and judgments.
Going further let’s just for one moment stop and think. How about letting these convicted business leaders come out on “parole” and see if the time served (however small it might be, I would think it would have given them a life time of experience) gave them change of mind? Or may be promise them with incentives to reduce the sentence if they serve their country by getting back into business of “managing businesses” or helping others manage business? Not sure if this will work with non white-collar criminals, but there is every chance that it might work with these white-collar criminals.
More importantly the current situation we are in might warrant this approach since their intelligence could be put to immediate use when it matters most. Necessary authorities can perform the oversight during this process. Now is this morally right (or wrong for that matter) to do so? There is an element of materiality here. These individuals do stand to gain in terms of possible early release if they could prove that their intelligence and experience can be put to good use. For starters this could be, providing guidance and lectures to budding entrepreneurs, ofcourse free of cost. There is no substitute to experience and these lectures and guidance can go a long way in preparing these entrepreneurs. After all people still pay to hear lectures on how to make money in real estate investments from Donald Trump even in this economy when similar real estate binging across the country brought us to this state. Ethics or morals play no part in this situation since it benefits everybody involved and harms none.
The individuals and communities directly/indirectly affected by these white-collar criminals might not agree with this argument. They could very well argue that this kind of arrangement will never work and this will only embolden those individuals instead of making them repent for their deeds and actions. And the whole purpose of punishing them by sentencing them to prison will be defeated. They could also argue that the bigger problem with this approach is that it could set a precedent for others to commit such white-collar crimes and still evade punishment with these arrangements.
The supporters of the approach could argue that no sane human being with intellectual background would knowingly commit such crimes when he/she knows what is in store for them. Convicted white-collar criminals do not stand to gain even in financial sense. Once they were convicted financially they completely fell apart. This is not the case with the current CEOs and the senior executives who have helped the economy into recession. Not only have they received (some have) bailouts from the government but also some of them received bonuses to the tune of millions for their so called “performance”. Since they had committed no “crime” they are free to reap the benefits of their earnings. In my opinion this is quite unethical. But we are in a capitalistic country and free will and free market reign supreme. So any ethical or moral argument breaks down.
Now consider a variation. The assumption in the above situation was that given an opportunity to reduce the sentence/punishment, these white-collar criminals would agree to help. What if they do not, since the rewards are not big enough? May be the amount of time reduced is minor and does not really matter whether you agree to do it or ignore the proposition. More than likely this situation might not arise at all.
Conclusion
It can be worthwhile to consider some of the ways in which these white-collar criminals can be utilized. Here is an opportunity and we should make the most of it since there is nothing to lose. Even hardened non white-collar criminals are given opportunities to reduce their sentence if they exhibit good behavior consistently. Not doing anything could be an opportunity lost.
This idea can be implemented on a very small scale with one/two individuals. This approach is not unethical since both the sides stand to gain. There could be some legal complications, but I am sure those can be very easily sorted out
