The Imperial Chief Executive Is Suddenly in the Cross Hairs

Stephen M. Case, a hero of the 1990's for having built America Online into a multimedia giant, sat on the stage at his company's annual meeting last month, listening to investors mock him for overseeing multibillion-dollar losses.

Jeffrey R. Immelt, following in the footsteps of the lionized John F. Welch Jr. at General Electric, has tried to soothe rebellious shareholders by releasing more information than Mr. Welch ever did, but G.E.'s stock has still fallen more sharply than most others this year.

Meanwhile, Charles R. Schwab, hoping to capitalize on Wall Street's new unpopularity, has appeared in a television advertisement proclaiming his brokerage firm "a different kind of company."

Across the business landscape, the imperial chief executive, hailed not long ago as the savior of entire companies and the driving force behind the turnaround of the American economy, is suddenly under siege. With two prominent executives being indicted in the last month, accounting problems continuing to emerge and the stock market stuck near its lowest level in three years, executives are facing their most significant challenge in a decade or more.

To respond, chief executives have begun a delicate two-step intended to answer their critics and still defeat efforts at systemic change. While proclaiming their own companies to be fully healthy and the recent disclosures about problems at Enron, Tyco International, Rite Aid, Imclone Systems and elsewhere to be a series of exceptions, many executives have become more solicitous of their investors, more open about their financial dealings and more responsive to detailed questions from board members. But few are willing to sacrifice even a sliver of the many privileges and huge pay packages they were awarded in recent years.

"We C.E.O.'s have to do gut checks," said William D. Zollars, the chief executive of the Yellow Corporation, one of the nation's biggest trucking companies, who has been attending meetings with investors that he once would have skipped. "We have to make sure we're playing it down the middle of the fairway, not close to the lines."

For much of the booming 1990's, the nation's chief executives could make the case — and they often did — that they embodied all that was right with America. They received personal credit for nearly every improvement at their companies, accumulating enormous wealth and prestige in the process. Some, like Mr. Welch, who received a larger book advance than the pope, became international celebrities, thanks to fawning magazine covers and idolatrous management tomes.

Today's far different atmosphere has helped contribute to a decline in major stock market indexes even as the economy has apparently emerged from recession, a chain of events that had not occurred since the 1920's.

The actions of just a few chief executives have hurt the images of everyone else. "It's the same thing as when a couple of policemen are found corrupt," said Jean-Pierre Garnier, the chief executive of GlaxoSmithKline, the drug company, echoing the frustration of his peers. "The whole police department suffers."

To others, however, the individual problems that have become apparent since Enron collapsed last December suggest that many of the usual checks on chief executives' power disappeared during the giddiness of the 90's economic boom. Now some investors, who tended to give executives free rein when stock prices were rising, are trying to force changes.

Ten days ago, William H. Miller III, one of the market's most successful mutual fund managers and a recent critic of the board at Starwood Hotels and Resorts Worldwide, picked up the phone to find Barry S. Sternlicht, Starwood's chief executive, on the other end.

Mr. Sternlicht built Starwood into one of the world's largest hotel chains by buying bigger rivals and starting the unexpectedly popular W Hotels, nearly all before his 40th birthday. He forced out many of his deputies along the way, received a raise last year even as profits fell and, provoking Mr. Miller's ire, recently decided not to heed more than three-quarters of his shareholders, who passed a resolution asking for changes to the board.

But Mr. Miller gave him little of the deference to which chief executives had become accustomed in the booming 90's. Instead, Mr. Sternlicht received a lecture on democracy.

"Barry, my issue is simple," Mr. Miller, who runs the $11 billion Legg Mason Value Trust mutual fund, recalled saying. The founding fathers, he said, thought that any issue that could gather the support of three-quarters of the states was good enough to be in the Constitution; shareholders should have the same power over the company they own. "What's good for America," Mr. Miller said, "is good for corporate America."

More broadly, investors and private groups, including the business-sponsored Conference Board and the governors of the New York Stock Exchange, are proposing new rules, including one to limit executives' stock option awards and another to require that many board members have no other connections to the executives reporting to them. Regulators at the Securities and Exchange Commission and elsewhere have become more aggressive about investigating executives' behavior.

Americans' perceptions of executives' integrity, meanwhile, have dropped sharply since the 90's. People now say public officials in Washington are more honest and ethical than business leaders, a switch from earlier years, according to the Pew Research Center for the People and the Press.

"We now have too many examples for people not to conclude there's a pattern," said Scott C. Cleland, the chief executive of the Precursor Group in Washington, which advises investors. "We have a deep crisis of confidence."

Chief executives have proved adept in recent years at avoiding nearly every attempt to curb their power, and they have an important ally this time. The Bush administration is emphasizing the enforcement of existing laws over the passage of new ones, which the White House says could make companies less efficient and slow the economy. Having watched the political standing of the nation's captains of industry drop, however, administration officials have stopped comparing President Bush's management style to that of a chief executive and have harshly criticized some business behavior.

"You should get on the tabletop and scream out against the abuses that have been done," Treasury Secretary Paul H. O'Neill advised executives in a speech last week. "This is not what we think is responsible behavior," added Mr. O'Neill, a former chief executive of Alcoa. "We don't like it any better than anyone else."

At the very least, the most opulent behavior of the last decade has become more difficult to justify.

Christos M. Cotsakos, the chief executive of the E*Trade Group, the online brokerage firm, had made something of a joke of his willingness to throw away money. During the 2000 Super Bowl, a company ad showed a monkey wearing an E*Trade T-shirt and clapping, with a tag line saying, "Well, we just wasted two million bucks." After the monkey's star turn during this year's game, Mr. Cotsakos himself appeared on camera reading a newspaper with the headline, "Monkey Flops. Silliest Ad in Game History."

"We have a deep crisis of confidence."

That's the problem and its not going away soon.

I believe it stems from a lack of integrity that encompasses not only the business world but government and, tragically, even religious institutions as well.

Rebuilding trust is a long glamorless task, but it must be done. Where have all the honest men gone?

You and this article are absolutely correct.The average American is not stupid and these CEOs making their millions even when they are losing money,these boards that protect them and even raise their salaries while they are falling apart have finally brought America almost to her knees.It shows a couple of things and I hope the average American is watching closely.

First the American Justice and Judicial System should be in question and the term Rule of Law. You rob a bank with
a weapon, get $1500.00 and you get 15 years.You can steal $115 Million dollars with a pencil and they dont even have a rule of law to really prosecute you.This tells me the system run by lawyers is set to protect the rich and the hell with old average John Doe American.They have made them a system to legally steal from the poor. I thought the government was the only one that could legally do that!

It also shows me that our Congress is right in step with Wall Street because they may put on their dog and pony show but most of the leaders have been protected and been given all of this inside information and made plenty plus even if they lose anything they just enact legislation to increase their retirement which is 10 times better already than the average Americans.

We still have a system of indentured servants in America and it is you and I the average American..

"First the American Justice and Judicial System"

I think bj and oj clearly demonstarted that the entire judicial system is for sale to the highest bidder.

The stock market is built on confidence. If people can no longer trust accounting firms to accurately report profit and loss how can they make prudent decisions?

The FBI & CIA are so caught up in gaming each other and lying to the American people that no one can believe anything they say.

Even the Catholic Church, my Catholic Church, has been exposed as a cesspool of corruption. And the leaders of the church SHAMELESSLY hire PR firms to repair the "damage".

All of these leaders need to held to account. But who can rightously hold them accountable when the media are themselves the worst whores of the lot?

I want to see the bishop of New York walking down 5th Ave. in sack cloth and rags pouring ashes on his head for the disgrace he has brought to his holy office. I'm not speaking figuratively.

And that should be the model for all those others who have betrayed their public trust. Until real pennance and true retribution takes place it will only get worse.

I believe it stems from a lack of integrity that encompasses not only the business world but government and, tragically, even religious institutions as well. Rebuilding trust is a long glamorless task, but it must be done. Where have all the honest men gone?

The secularization of the culture by destructive liberal ACLU-types, the Planned Parenthood sexual libertine vanguard, Hollywarped's anything goes attitude, Hollywierd cretins like know-nothing Norman Lear and his misnomered People For the American Way, have all conspired to corrupt the culture. Add to this rancid stew the atrocity of "political correctness" (PC) in which criticism - even of the most depraved criminal behavior - is frowned upon. PC serves to protect certain elite classes of criminals from societal disapproval and even its legal consequences.

My friend ,so well spoken.The only hope for America could quite well be sites like this.There are disagreements in here but for the most parts this site and the Freepers are on the money.
In America you hear about a built in means of checks and balances and I totally disagree with that.Points of interest I would like to make.
The legal system has no checks and balances due to the fact everything starts and is controlled by lawyers.No law is passed without approval of a lawyer.All evidence presented in a court must be approved by a lawyer.Any appeal has to go through a lawyer and be ruled on by a lawyer.You see there are nothing involved that is not controlled by (A) lawyer.Now which fraternity do you belong to?
There are no checks and balances on a newspaper.They print what they like and you as a citizen have no recourse and if it is about you normally the damage is done even if you had a recourse.And I know from first hand knowledge they will print lies about you without verifying them and not give you a chance to respond.They like politicians are great at putting into print half truths and lies.
You have no recourse against any elected entity.They can and do willfully violate the law and their own rules when they can get a majority of their body to go along and in most cases the majority are so tied to one another they cant disagree and to my friends who say do it on election day the damage is already done when that comes around.I have come to realize there is very little truth left in Americas governments,legal system and in the media and it is dragging us down to the pits of hell.

yes, it is discouraging indeed. Your points about the lawyers is absolutely true, and they have a lead pipe lock on the machinery. All politicians are lawyers and they have rigged the electorial system to almost guarantee their perpetual re-election.

That is why it is so critical that leaders in the private sectors DEMONSTRATE and set a standard for accountability. There is no one in the government that is in any way accountable.

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