Irresponsible business practices have induced an economic downfall that has affected every American. Capitalists are known for their hands off approach toward business, but recent scandals show us that large corporations are abusing this privacy. The latest trend of corporate scandals has raised questions about the degree of government involvement in businesses. This has created difficulties because of the traditional deregulatory attitude Americans have and because of the strong ties between corporations and politicians. (Gonick3) Although there are obstacles we must over come, it has become obvious that some sort of corporate regulation is necessary.
In regards to business, the recent history of America has been one of deregulation. After the restrictions corporations faced during the New Deal, they entered a period of neoliberalism. As Gonick states: “It is important to remember, after all, that neoliberalism was itself a response to an earlier crisis of profitability ultimately produced by the Keynesian welfare-state regime that was ushered after the New Deal.”(Gonick 3). At the time, intellectuals and business owners believed that deregulation of business would promote investment deals and free trade. In the privatization of the public economy in the early nineteen seventies, new businesses quickly sprung up. Companies like WorldCom emerged to compete with Bell, the telecom titian of the time. (Gonick3) Soon, many companies found themselves in debt; they had overspent and overbuilt. “In their effort to win market share, the new players overbuilt, creating vast amounts of over capacity- and huge debt loads.”(Gonick 3) In response to the huge losses, CEOs resorting to fake numbers to secure bank loans and equity investment. According to the editors of Business Week “If companies come clean about their accounting practices and stop managing earnings, stocks may suffer a prolonged drag… companies have been overstating earnings by as much as fifteen percent annually over the last five years.” Corporations have sustained themselves through false confidence in their profitability. As Business Week put it, “the new economy is mostly hype.”
CEOs enjoy an incredible amount of freedom and power. They are free to arrange almost any salary, expense accounts, stock options, severance packages and company loans. As an insider, they also have the ability to pull out stock before a big crash. Despite the fact there is a significant number of corrupt CEOs, most are rarely convicted. When they are, they never face any prison time with such ample recourse to post bail. (Gonick 2) After committing a crime that puts thousands out of work and even without pension, CEOs receive a slap on the wrist.
Politicians are hesitant to make strong reform attempts because of corporate political connections. The same companies that are involved in these scandals are financing the campaigns of top politicians. “Since, at heart, the corporate scandal is a political scandal- corporate money corrupts politicians, who by passing or neglecting to pass laws, make corporate crimes possible and profitable.” (Huffington 1) Once elected, politicians hold a responsibility for the businesses that financed them and are reluctant to take any action that may harm the company. The single largest contributor to Bush’s presidential campaign was Kenneth Lay, Enron’s Chairman. It is safe to assume that this political connection had affected his sentence after the Enron scandal. “It is hard to see how we will ever get rid of this corporate hangover until we cure our politicians unslackable thirst for campaign cash.” (Huffington 1)
The Security and Exchange Commission is a government organization that is designed to monitor corporate behavior; recent scandals have put increasing pressure on them to do so. Congress agreed to increase SEC’s budget by seventy five percent, from four hundred thirty eight million dollars to seven hundred sixty six million dollars. (Birnbuam 2) SEC’s workload has significantly increased due to the scandals. They must create an accounting regulator, review the filing of the largest companies twice as much as before, extract new disclosure forms from CEOs and devise a system for disciplining lawyers who fail to report wrongdoings. (Birnbuam 2) Ironically the head of the SEC, Harvey Pitt, is a lawyer who represented accounting firms among other companies. Pitt is a strong advocate of deregulation, even now, during a time when most feel some regulation is necessary. Pitt went against the general notion and opposed tough government intervention and promised “a kinder, gentler SEC”. Congressman Richard Gephardt and Senator Tom Dashel criticized Pitt for “behavior that steadily eroded the credibility of SEC”. (Birnbuam 3) Pitt clearly is not the right man for the job at this time.
Although regulation and reform are so dire, we can’t begin to reform until we attend to the structural obstacles; corporate reforms cannot be reached until political ones are. Although any government involvement in business is viewed as “un-American”, some regulation is required to ensure the welfare of average Americans.

Citations:
1. Birnbaum, Jeffrey. “It’s Time For Him To Go.” Academic Search Premier 146:8
2. Gonick, Cy. “No Capitalism Without Conscience?.” Canadian Dimension 36:5
3. Huffington, Ariarna. “It’s time to call a halt to the corporate financial scandals by instituting real reforms. We should also start rewarding socially conscious companies.” Nation 276:4

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