Whatever Happened to Corporate Reform?
Hoo boy, we're really teaching those high-flying, finagling CEOs a lesson in corporate ethics, aren't we?
The latest to have to take their medicine are six former top execs at Xerox Corporation. They were recently found by the SEC to have cooked the company books and illegally inflated profits by $1.4 billion over four years. These actions fraudulently misled investors and allowed the executives themselves to pocket millions in personal pay that they were not due.
But -- Pow! -- the SEC regulators have now socked the slippery-fingered six with $22 million in penalties! That'll teach 'em... right? Well, not exactly. It seems that, under the sweetheart bylaws of the corporation, $19 million of this legal assessment will be picked up not by the executives, but by Xerox and its insurance companies -- plus, Xerox will pay the legal fees for the six.
So it's you shareholders of Xerox and you ratepayers of the insurers who'll pick up the bulk of the tab for these dirty-dealing executives -- and ultimately we taxpayers will be hit for it, since Xerox can deduct a chunk of this payout from its corporate income tax, claiming it as a cost of doing business.
So, what are the lessons here for other CEOs... and for our children? Crime pays! Paul Allaire, for example, was the Xerox CEO who presided over this shameful ripoff, and he has to pay a million-dollar fine out of his own pocket. That sounds like a serious bit of punishment... until you do the math. The SEC found that he had put $5.7 million worth of fraudulent gain in that pocket during the four-year scam. So his haul is a nice net of $4.7 million. That's good work if you can get it!
The lawyer for Allaire and another Xerox executive said that the two chieftans had settled so they could "put this issue behind them and get on with their lives."
In the world of corporate crime, instead of being sentenced to a hard jail bed, you get a golden pillow. So much for reforming corporate ethics.