Ethical Issues

Tax evasion

■ Wrong Accounting

■ Negligence of Eco-system

How should we respond to the wave of scandals that have hit corporate world? Immediate measure seems to be only one : more laws in general and criminal laws in particular.

Toughening existing criminal laws and adding new ones might seem the best way to make sure that future Enrons and WorldComs won't happen -to send a clear message that corporate world will not tolerate dishonesty in corporate boardrooms. But it won't work. We have gone down this path many times before, and if experience is any guide, new criminal laws are as likely to make things worse as to make them better. The reason is both simple and all too easily ignored: Criminal laws lead people to focus on what is legal instead of what is right.

The result is that corporate wrongdoers escape punishment because they invest in creative ways to skirt the law. And honest executives, instead of focusing on doing their jobs honorably, wind up playing the same legal games dishonest executives play. That is the natural consequence of relying too much on criminal law and too little on civil regulation and, especially, moral norms.