Time to draw a line in the sand.

• Author: Grace, Jr., H. Stephen
• Position: From the Chairman - Corporate governance

The headlines from the enormous ethical scandals in the U.S. of the last few years-Worldcom, Enron, Tyco, HealthSouth--are beginning to fade somewhat, even as the main actors in some of these scandals face indictment, have gone to trial or reached plea bargains. Regrettably, similar scandals are beginning to emerge in Europe and elsewhere. In both the U.S. and Europe, senior financial officers are at the center of these scandals.

All of us who practice in the area of finance--all of us as members of FEI--have had a dark shadow cast over us by these developments. This is sad, particularly given FEI's leadership in promoting ethical behavior. FEI has a long history of focusing on ethics and, for years, has required members to sign our Code of Ethics. Our recently revamped Code of Ethics was incorporated in the Sarbanes-Oxley legislation.

The fine work of FEI and others on ethics not withstanding, the ethical breakdowns have continued. The time has come for FEI to draw a line in the sand. We must do more to encourage and support our members and others who are committed to work ethically, and to deter those inclined to do otherwise. FEI is moving forward, recognizing the following:

* Codes of ethics and moral persuasion are not enough to carry the day--in spite of 5,000 years of wonderful spiritual guidance, people continue to go off the path.

* The underlying causes of corporate collapses are corporate governance structures that permit an individual or a small group of individuals to consolidate power, to shroud their activities and to manipulate and intimidate those around them.

* There is the need for corporate governance structures to incorporate robust checks and balances and to be characterized by transparency.

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FEI and the Institute of Internal Auditors (IIA) have joined together to study and...