As the recession worsens it’s easy, in our anxiety, to forget the corruption and corrosion in some circles of business life that brought us to an impasse both dangerous and disillusioning. It came home to me once again at a board meeting of a small foreign policy group in a city other than Dallas. We were discussing an additional benefit for the CEO that at first had seemed not to be taxable. But our attorney’s opinion had changed. Now, apparently, it is taxable, and the board was incorporating that view into its plans.
The question was this: Should the CEO’s salary be raised to cover the cost of the taxes he would have to pay, to make him whole, as they say? A young man at my end of the table began to argue, quite energetically, that private people in the group could pay a third party, not the CEO, for this benefit, and it would be off the books. That way no tax would be due at all. I started to point out that it was the drive to get loans off the books, and thus not subject to capital requirements, that led various big banks to securitize their way and ours into a global catastrophe. Whenever anybody wants to go off the books, watch out.
Fortunately, before I could speak, another member, blessedly possessed by some scruples, said no, we want this to be handled in the right way. The right way. This is an idea, I suspect, with no meaning for that young man in love with a world that’s off the books.
Then I had a long, stimulating conversation with another young man, here in Dallas, who’s very bright and convinced, as are some others, that the current calamity was caused by the reckless indulgence of just about everybody. I do not agree. In Adam’s fall, we did not sinn-ed all, not in this case. There were plenty of people living in houses they could afford, at least then; not taking foolish chances to earn one more percentage point on their savings; running honest businesses and working hard at productive jobs, now lost because of the off-the-books crowd, plus some individuals, companies and governments that gorged themselves on debt, egged on in many cases, by operators in private equity.
But what if your job is to help clients avoid taxes, or raise capital at levels that are madly unrealistic? That’s where professionalism comes in. And a professional, I’ve heard it said, knows where and when to draw the line: this far and no farther. All that began to be lost in the 1980s. Some law firms, here in Dallas and elsewhere, decided they were businesses, obsessed with growth. Accounting firms added consulting operations alongside their traditional calling, creating an implicit conflict of interest. How could they be tough in an audit when other lucrative business was at stake? Bankers grew bored with their fiduciary responsibilities and felt they were not in the game if they, too, were not rolling the dice, everyday. Doctors have not been immune to the fever of financial maneuver either. Some have done procedures that might have been postponed, perhaps indefinitely. Others have milked Medicare for unjustified, even fraudulent, reimbursements.
How can the country recapture a professional class to check the excesses of the gang that cannot shoot straight, no matter how many reforms are enacted by Congress? The answer lies in professional schools and organizations–the bar for example–and in peer pressure. Without the return of professional principles, much more will be lost, including, I fear, a whole generation.