Regulating the future

Ours is a campus full of future I-Bankers. They flock to open houses at the Nassau Inn as if free Goldman Sachs t-shirts were a rare commodity. They prepare answers for interview questions about stock options and margin calls. They do problem sets and watch CNBC. Ours is also a campus devoted to discourse and debate, passionate about being "in the nation's service" and finding solutions to societal problems. Yet, when it comes to recent scandals and abuses in corporate America, Princeton has had a surprising lack of discussion. There is no lack of material: The summer saw Martha Stewart and Kenneth Lay, among others, prosecuted in the court of public opinion. The recent resignation of SEC chairman Harvey Pitt, and the revelation that the organization he once led is grossly under funded and understaffed, further drive home the need to address the violations of law and ethics being committed by America's captains of finance and industry. As those who will succeed them, it is our responsibility to seek reform.

The problems inherent in the current system of enforcement are not difficult to weed out. Even when first created in 1934, the Securities and Exchange Commission was under funded, largely because of the influence of what William O. Douglas, one of the first chairmen of the SEC called, "as strong a lobby as ever moved into Washington, D.C." Today, the most crucial portions of the SEC, including those agencies charged with enforcement and compliance inspections, are short hundreds of professionals and staff people. Lawyers and accountants overwhelmed by corporate filings and required to do secretarial work to keep offices running, will, understandably, fail to spot problems in dense financial statements. Still, Congressmen who have been more than happy to rail against the vices of corporate America in press conferences and on Sunday morning talk shows, have shown no desire to raise the SEC's budget by any meaningful amount, or to allow the SEC, which generates $2 billion a year in revenues, to strike out on its own.

The lack of enthusiasm for SEC reform sheds light on the cozy bedfellows of Wall Street and Washington. President Bush is a man who made his money in the oil business. His cabinet is full of corporate executives, many of them with questionable records of compliance with the law. Apparently the bureaucracy is useful for political but not policy gains.

Tempting though it may be, we cannot blame all the problems of corporate America on those in Washington. We must also question a culture which creates men and women who see insider trading and the defrauding of stockholders and pension recipients as just another step towards a bigger house in the Hamptons, a more expensive jet, or another step up on the list of America's wealthiest people. Have we really become a country so motivated by the quest for dollars and status that we fail to see what is beyond the bottom line? As more Americans become stockholders, it is in our best interests to demand that business schools teach ethics and the corporations have a conscience.

The SEC, regulation, accounting practices: None of these are headline-grabbing topics. They involve numbers and calculations and documents thousands of pages long. Though it is tempting to ignore these issues, to spend our time debating more scintillating topics, we must pay attention to what is being done to solve these problems. We will inherit the world of finance that is in such questionable ethical territory. As voters and students devoted to discourse, we can consider the effects of campaign finance reform; we can pressure President Bush to appoint a truly independent SEC Chairman, and we can demonstrate that ethics and honesty are not merely idealistic concepts. Corporate abuses can be fixed. With an eye toward the future, and an emphasis on reform both inside and outside the Beltway, we can help to seek solutions. Katherine Reilly is a sophomore from Short Hills, N.J. She can be reached at kcreilly@princeton.edu.