Illegal Conducts of the American CEO ‘Repeating Over and Over Again’

‘Is America a country of greedy CEO’s?’

The voice of worrying the ‘moral hazard’ of the business managers are raised while the illegal scandals of major American CEO’s are being brought to light everyday.

While it was brought to light on the 25th that the founder and former CEO of the American communication company Worldcom, Bunny Evas, committed the biggest accounting corruption, MSNBC reported on the 26th that around 10 CEO’s are being investigated by the prosecution and the Securities and Exchange Commission.

The worst CEO corruption case that shocked Americans was the president Martha Stewart(60) of the ‘Martha Stewart Company’, which provided family related information.

The recent copy of a newsmagazine, Newsweek (July 1st) reported that the president Stewart fell under suspicion that she sold 230,000 dollars worth of Imclone stock using the internal information offered by the CEO of the Imclone, Samuel Waxal.

The stock price of the Martha Stewart Company fell to the lowest in the history, 10.05 dollars a share.

The CEO of Imclone, Mr. Waxal was arrested with a blitz while being investigated on suspicion of stock market fraud collusion. Mr. Waxal sold his 50,000 shares right before the day when the FDA rejected the approval request of the anti-cancer drug ‘Erbitux’. He obtained that information ahead of time.

Mr. Waxal also provided the information to his family and friends to sell the stocks as quickly as possible. The bona-fide ordinary investors had a tremendous loss because the stock price fell down by 90% after the rejection of the FDA.

What is more, the founder and the CEO of the 6th largest cable TV company ‘Adelpia Communication,’ John Lee, was found that he obtained on multi-billion dollar nonledger loan by the assurance of the company, so he was investigated by the prosecution and the SEC.

In addition to those, the accusation of the fabrication of the evidence was added to Dennis Kozlowsky who was under indictment on suspicion of tax evasion of more than a million dollar.

There was an assertion that the structure of the board of directors should be changed to prevent the corruption of the CEO’s. According to the reform bill by the NYSE on the 25th, it set that the number of the outside directors should be more than 2/3 of the board members and the board meeting should be held regularly in time of absence of the CEO’s.

And it also proposed that the number of the companies, which the outside directors can work at the same time, should be limited so they can supervise the business management more thoroughly.

Mi-Kyung Jung mickey@donga.com