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Derailing the CEO runaway train. A lot of our favorite themes run through "Addressing Reform" by Stacy Forster in the Wall Street Journal, subscription required:

Voters want to know what their elected leaders are doing to hold disreputable companies accountable for governance and put safeguards in place to prevent future scandals, says Jeffrey Sonnenfeld, associate dean of the Yale School of Management's executive-education program, and president of the school's affiliated Chief Executive Leadership Institute (www.ceoleadership.com), a nonprofit group that examines CEO leadership and corporate governance.

[...]

Mr. Sonnenfeld says corporate malfeasance is so widespread that most of investing public considers fraud a prevailing practice. While the Bush administration is working to distance itself from shadowy corporate practices, he says, Democratic presidential candidates aren't doing a well enough job in taking the Republicans to task over the issue.

[...]

Q: What about President George Bush and Vice President Richard Cheney's own histories on this issue -- how much of a liability are they? (Mr. Bush was investigated by the Securities and Exchange Commission for insider trading while serving as director of Houston-based Harken Energy Corp., but no misdeeds were found. Mr. Cheney was CEO of Halliburton Corp. during a period that also has come under SEC scrutiny, but he hasn't been implicated in any wrongdoing. Mr. Cheney also successfully blocked the release of records from his energy task force, which would have shed light on how Enron and other industry players influenced the administration's energy policy.)*

A: I'm not sure how much awareness there is about the president's own complicated situations. The political parties -- the Democrats -- will work to bring attention to it, but they surprisingly haven't been lately. But the vice president's [history] is better known, and the stubbornness to block the actual deliberations of an energy advisory board that both parties wanted shared is troubling. You can only imagine the worst and you can imagine there is some deep Enron involvement. But the administration has been working to distance itself from Enron.

[...]

Q: Many of the Democratic candidates talk about reining in executive pay, but how do they propose to accomplish this? And what do they do to prevent coming across as antibusiness?

A: [Efforts] shouldn't be on putting ceilings on pay, but it could be pressures put on negligent board directors that allow disproportionate pay packages that don't respond to a company's performance. If [the candidates] do it the right way, they should be pushing good business.

Q: This seems like a prime issue for many of these populist candidates …

A: There are some bad people and systemic reforms need to be addressed. If they fall into the trap of making it a class war**, it becomes one they are going to lose. This is not a society where haves and have nots hate each other … . This is a fluid society and people like the fact that some folks succeed and want to be among those successful people. Rather than make a crude attack on all successful people, go after the people who succeeded by cheating. But when politicians show they can't tell the difference they lose credibility and effectiveness.

Q: What's on the checklist for some practical steps that the next president might be able to take to shore up corporate governance?

A: Closing the offshore tax loopholes so you don't have pseudo-U.S. companies. Ensuring greater mechanism for shareholder voice on the board, such as transparency of votes of institutional fund managers -- and hold them accountable. Third is putting a good deal of pressure on public authorities to promptly investigate and swiftly prosecute corporate crime, and to use individual culpability. The federal white-collar crime guidelines need to be dramatically improved … .

Did you catch that? "What's on the checklist for some practical steps that the next president might be able to take to shore up corporate governance?" It's assumed that the present president will promote nothing substantive — even the Wall Street Journal says as much.

*Remember that the Department of Justice moved swiftly to indict not Enron, or Merrill Lynch, or Harken, or Halliburton, or any of the true insiders, but instead went after Arthur Andersen, the auditor of Halliburton on Cheney's watch. Andersen's demise became the convenient smokescreen behind which evidence of Cheney's and Halliburton's financial (and strategic and ultimately military) misdeeds could be not only forgotten but permanently destroyed.

**"They, not we, have brought class warfare back to America." That's Bill Clinton in The American Prospect, full interview by Michael Tomasky not yet online.

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