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CNN Live Today

Interview with Jeffrey Seglin

Aired July 09, 2002 - 13:05   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: The rash of corporate scandals could hurt Mr. Bush's Republican Party come elections this fall. His opponents know that, and they are on the offensive. The White House minority leader beat Mr. Bush to the draw with a statement this morning before the president's speech.

(BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D), MINORITY LEADER: So far, the administration's approach has been a familiar strategy: Use harsh rhetoric to condemn wrongdoers, while delaying and watering down whatever reforms might come out of Congress.

Yesterday, the president said, and I quote -- "That some things are not exactly black and white when it comes to accounting procedures." Mr. President, with all due respect, accounting should be black and white, clear, precise and easy for every employee and every investor to understand.

(END VIDEO CLIP)

PHILLIPS: Several other Democrats responded by saying the president's party is entering late into the effort against corporate crime.

Joining us now to talk more about the president's new proposals, business ethicist Jeffrey Seglin. He is the author of several books, and writes a regular column on ethics for "The New York Times" -- hi, Jeffrey.

JEFFREY SEGLIN, BUSINESS ETHICIST: Hi, Kyra.

PHILLIPS: So what do you think? Does the threat of jail time, can that prevent a number of these individuals from being unethical?

SEGLIN: You know, it's -- the call for accountability and holding people responsible is a good start. So it's not a bad thing that President Bush is paying attention to it.

PHILLIPS: Well, the current laws of business are so conflicting and confusing when it comes to talking about ethics. Do you agree with that?

SEGLIN: Well, here's the problem with setting up more regulations and more laws. What then -- the fear, then, is that what ends up happening is businesses then have something new to figure out how to get their way around. There are reasons why businesses flock to a certain state to incorporate in, because those states happen to be more -- treat corporations more favorably than they do shareholders.

So the fear of adding more regulations and more laws just kind of -- the fear is that it's going to muddy the water. And I think the mistake that people make is that assuming that something is legal makes it ethical is not necessarily true.

PHILLIPS: So when the president says he is calling for a new ethic, what do you think he means by that? What should it mean?

SEGLIN: Well, I think -- I hope what it means is this whole -- the whole talk that he started back in March when he did his 10-point plan that he referenced today, and much of what he said today is the same thing he has been saying for the last four months. This whole need for people to be able to understand what it is they are investing in, the whole need for -- the buzz word of "transparency," where you can look at something and understand what it means without hiding a lot of things behind it.

If there is a new ethic, it's to be sort of transparent and to be accountable for your actions in business, and that's not a bad thing.

PHILLIPS: Well, do you think the president, himself, has been -- is a good example, has been a good example when it comes to his own business ethics and his own corporate practices?

SEGLIN: Well, you know, it's interesting. One of the unfortunate things, at least in hearing his -- not the speech today, but his press conference last night, is when the press was pushing him on the issue of his dealings with Harken Energy back in -- when he was -- I think in 1990. He talked about -- I think, Representative Gephardt just made reference to it, that in the corporate world, these accounting issues -- accounting procedures aren't necessarily black and white. And he kind of hid behind that, and that's the problem.

That essentially is what businesses do is they sort of point to this fact that it's confusing, and you couldn't possibly understand it, and it's too complex for the average investor to understand, as a way to sort of excuse any type of behavior. And that strikes me is it -- if the president really wants to make a point, he has got to push for that to stop being an allowable excuse.

PHILLIPS: He was also cleared from all of that back in the early '90s. I probably should make that point, too.

(CROSSTALK)

SEGLIN: I think they actually never brought -- they decided never to bring charges with both of those things.

PHILLIPS: Right. Exactly. OK, let's talk about analysts, all right, our stockbrokers, our financial advisers. I mean, the system is set up in such a way that it is so easy to be unethical. Can analysts be ethical?

SEGLIN: Well, I think they can. I think they can, but I think one of the things that happens with the analysts is the same thing that happens with the auditors. If the analysts are bringing in business to a company by recommending buy signals all of the time, then there's a conflict of interest. And I think what ends up happening is when there is conflict of interest in any industry or in any profession, there's a problem, even if it's a perceived conflict of interest. And that's the same thing that happened with the auditors.

When the auditing -- the supposedly independent auditors go in to look at a corporation's books, and those auditors are also trying to sell consulting services to the company, there's a conflict of interest. And I think to make it be ethical, those conflicts of interest have to be gotten rid of entirely.

PHILLIPS: Well, and I see it -- I mean, there has been times I have gone in to see my financial adviser, and he's getting free golf shirts and free golf balls and free trips and all this free stuff for doing business for these financial institutions.

SEGLIN: Yes. You know, there is a wide array of financial advisers. Some work on a commission basis, where they get a commission every time they have sold something. Some work on a fee- only basis. And there's a big discussion going around about whether or not it makes sense to go with a fee-only plan or adviser, because presumably they are not getting as -- there is not a conflict of interest, and it's a huge debate that goes on in the industry all of the time.

The solution would be is that he should give some of those golf shirts and some of those things to you.

PHILLIPS: OK. I'll ask him the next time I'm in his office -- Jeffrey Seglin, thank you so much.

SEGLIN: Thank you.

PHILLIPS: All right.

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