President and CEO
Jabil Circuit Inc.
Money flowed freely in the late 1990s. A lot of bad business plans emerged. As Tim Main summarizes the era, it was a recipe for disaster.
"Greed gets people. . . . They compromise their ethics," he says. "Now the hens are coming home to roost, and there's going to be a lot of fallout. Unfortunately, I think it will create more regulation and more bureaucracy that all corporations will have to support."
Main says there are ample laws already on the books but suggests SEC enforcement may have been lax.
As a CEO, Main says he struggles with speaking out on the issue of corporate corruption and financial accountability without drawing unwarranted attention to Jabil. "The perceptions are so negative, we're almost afraid the more we talk, people will think we're trying to hide something."
Jabil of St. Petersburg is considering adding one or two more independent board members, but Main says the board already is strong, with four of its eight members "independent by anybody's definition." Jabil's audit and compensation committees are made up entirely of outside board members.
The electronics contract manufacturer has long considered expanding its board, but today's climate has made it more difficult to find candidates willing to accept limited pay and ever-increasing liability.
"A lot of people are no longer on the market," Main says.
_ JEFF HARRINGTON
CEO and chairman
Tech Data Corp.
Corporate malaise over accounting fraud and mismanagement goes beyond a scattering of corrupt public companies, Steve Raymund contends.
"I think there are some systematic problems," he says. "It's governance, but it's also all about ethics. . . . There's been an erosion of ethics. . . . The '90s provided really fertile soil that would enhance man's tendency to enhance his own pockets at the expense of other people."
Raymund applauds most of the reforms being discussed but fears "going overboard" and scaring away talented executives.
Making chief executives personally liable for mistakes in financial reports might drive away an honest executive unwilling to swear he or she has a handle on everything going on in a sprawling corporation.
Raymund says he feels comfortable that Tech Data has straightforward accounting methods in which revenue is booked when the Clearwater computer reseller ships its products.
He says his board is strongly independent, with seven outsiders among Tech Data's nine board members.
Raymund says that lately, the outside board members are "asking more questions and they're asking better questions and insisting on more followup."
Raymund is thinking of starting formal gatherings of outside board members with no members of management present.
_ JEFF HARRINGTON
President, CEO and chairman
Sykes Enterprises Inc.
John Sykes makes no excuses for companies that falsify financial statements. "It's never acceptable to fudge the numbers," he says. But he says he thinks most companies report properly.
"It's sometimes like when an airplane goes down," he says. "There's a great deal that is said because so many people are unfortunately killed. When you compare that to the number of airplanes that fly every day, it's not a bad ratio, but it's not something that you want to happen."
Sykes, whose company is the subject of shareholder lawsuits over alleged accounting irregularities, says it's important to make a distinction between judgment calls over which reasonable people can disagree and "pure, outright fraud."
"People can make honest judgments that won't stand up . . . which, based at the time and based on their best knowledge, would be correct," he says. "In my opinion, there are more gray areas that call for judgment calls than there are black and white."
Sykes, founder of the Tampa tech support company that bears his name, says he favors President Bush's approach and thinks Bush is the right person to lead the reform effort. "Strong ethics and strong values begin at the top. I have tremendous confidence in President Bush, and I believe that he has given exemplary leadership," he says.
Sykes thinks a majority of a company's board members should be independent _ neither an officer nor a paid consultant, according to his definition. But there is nothing wrong with appointing one's friends, he says. "Some people would question whether people on my board are independent because I've known them a long time. But as far as I know, that's not a criteria" for independence, he says.
Though Sykes' fellow board members include his high school football coach, the company recently added at least two certified public accountants to its audit committee and instituted term limits.
Among other proposals, Sykes supports a law prohibiting companies from getting outside audit and consulting services from the same company, favors lengthening prison sentences for white-collar crimes if it proves to be a deterrent and opposes regulating executive compensation.
Sykes has had outside audits for 25 years but didn't begin conducting internal audits until 2000, the year it was first sued for alleged accounting improprieties.
"Although we've had our challenges, Sykes has always had good auditing practices, good reporting practices, and has relied on both good internal and external financial resources to make sure that the best judgments were made," he says.
_ SCOTT BARANCIK
President and CEO
Florida Power Corp.
Bill Habermeyer doesn't think the recent accounting scandals should be viewed as an indictment of corporate America.
"It's always easy to blame the system, but my sense is that it's the individuals themselves who decided to take on these egregious practices," he says.
"Every CEO has responsibilities to a number of constituencies _ employees, customers, shareholders, those who are relying on them for the strength and stability of the company," he says. "It just seems to me that some of these executives saw their own health and self-aggrandizement as more important than the interests of these constituencies."
Habermeyer finds it ironic that some attribute alleged instances of shady accounting to the enormous pressure faced by corporate executives to increase shareholder value: They're supposedly "doing it for the shareholders, and today those shareholders are penniless."
Florida Power of St. Petersburg and its parent Progress Energy Inc. haven't made any recent changes in accounting standards because their existing standards are "very consistent with the practices proposed by Congress, the president, the Public Service Commission and all our oversight authorities," Habermeyer says.
_ LOUIS HAU
Chairman and CEO
SRI/Surgical Express Inc.
Richard Isel is particularly sensitive to charges of corporate wrongdoing and insider dealings.
For the past six months, the SEC has been investigating his company after it restated its earnings last fall. And Isel has been criticized for taking a personal loan from an independent board member. "You can't change who your friends are," Isel says of the $3-million personal loan from board member Lee R. Kemberling. "I probably wouldn't do it over again, but we reported it."
Isel was recently told the SEC's investigation is complete and a report would be forthcoming.
"We believe they did a thorough job and they'll find the situation is just what we reported," Isel says of the restatement, which he blamed on a billing error.
But the experience convinced Isel the SEC is understaffed and needs more authority. "They put a lot of resources on top of us, but it's obvious they're under pressure," he says. "They've been given marching orders to treat $50-million like $50-billion, and that's an okay attitude, but with no resources, their investigations go on for months. The public would be better served if they could get in and get out of companies quickly."
Confident that his company will be cleared of wrongdoing, Isel says executives who have committed fraud should be jailed and fined. "I for one think Bush could go farther," he says. "As a private investor, I'm scared to invest in a lot of companies."
Isel says his company added a chief accounting officer and changed its billing system after its earnings restatement.
His company's six-member group, which includes three employees, will become more independent over time, Isel says.
"Several of us have plans to retire over the next couple of years," Isel says of the employee-directors. "So we'll become outsiders, though we'll still be major shareholders."
Isel says that since the SEC began its investigation, his directors have become much more closely involved with the company. And he expects them to begin meeting monthly, rather than quarterly.
"I feel more comfortable with them as part of the decisionmaking process," he says. "If a board only spends a day a quarter at the company, they're totally at management's whim."
_ KRIS HUNDLEY
Chairman and CEO
Raymond James Financial Inc.
Thomas James is hardly an apologist for WorldCom, which he thinks committed "out-and-out fraud." But he disagrees that such cases of corporate wrongdoing are widespread or an indictment of the system.
"It's not endemic," he says. "We're having more of them show up and they're more dramatic because the stocks were more inflated, and that makes it seem worse.
"I think this is terrible. It obviously impacts the opinions of investors about our system. I always complain about movies that make corporate guys out to be bad people. Now they've got reason to do it."
James says he favors most of the proposed reforms except for one to require a majority of outside directors, which he doesn't think would bring any benefit.
"There is no evidence that suggests that companies with a majority of outside directors perform better than those with a majority of inside directors," he says. "A lot of the problems that have currently surfaced have surfaced in companies where there's a majority of external directors."
James says it is extremely difficult for outside directors to be as effective as insiders, no matter how good their intentions.
Moreover, it has become tougher to recruit outside directors amid the scandals. "An outside board member is going to have to be extremely diligent, or he just shouldn't do it," he says. "These events really bring it home to roost. I don't think any of these guys expected their old buddies who were CEOs to be perpetrating fraud on them."
James says he has had mixed experiences serving on a dozen public company boards through the years. "I've been on very fine ones that bring every issue to the table and have full disclosure . . . and I've been on ones that the CEO totally controls. Sometimes their agenda is different from what I think is good for the shareholders."
James endorses several key proposals on the table, such as not paying outside auditors for consulting work and not letting top executives borrow money from the company.
But he says he doubts the effectiveness of an initiative to compel CEOs to accept greater liability in signing off on financial statements.
"I really don't think that signing statements with personal liability will impact a crook. If they were willing to overstate earnings and capitalize expenses, they were already doing something that was going to cause them no end of grief if they got caught."
_ HELEN HUNTLEY