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The US giant WorldCom's accounting scam involving US $3.8 billion unfolded last week before the heat of the Enron collapse had cooled off. It prompted President Bush and other G8 leaders meeting in Canada to debate how to tackle corporate misdeeds. Financial markets were once again in turmoil. Pension funds lost hundreds of millions of dollars overnight.

What is the root cause of these two and other corporate scams that have eroded billions of dollars of investor funds in the United States over the past year? How can Governments, regulators and auditors prevent or control corporate malpractices and false financial reporting? To what extent has investor trust been broken by these wrongdoings and the systemic failure to detect them before causing corporate collapse?

The system that breeds corporate greed, places profits and material possessions ahead of public interest, professional duty, personal responsibility and integrity and the very culture it breeds - these are at the pith of these troubles.

Value systems in business and credibility of business leaders, auditors, financial analysts and those wielding political power have deteriorated over the past few decades. Sri Lanka is no exception. It is perhaps the small size of business organizations, conservative attitudes of our people and the legacy of the pre-1977 control era which left behind an over-regulated environment that on the one hand impeded economic growth but on the other, kept corporate adventurism in check. Sri Lanka has had its corporate failures too, some similar in proportion to the corporate failures in the US relative to the size of the economy. The finance company scandals of the early 1990s and some of the more recent failures that, due to our inept system are not yet bankrupcies, come to mind. What can we do? What should we do to protect investor funds?

Man will always have greed. That cannot be eliminated (unless of course one becomes an "Arahath"). It is that human nature that has been so well exploited by the capitalist system to improve productivity, create a quest for quality, accumulate and invest wealth and make the forces of the free market work for the prosperity of the people. Human greed needs to be tempered. Our country, like others have laws to control corporate wrongdoings. We too have audits, accounting and auditing standards and codes of corporate governance. But events have proved that the systems, including the regulatory mechanisms that exist in our country and the developed world are inadequate.

The Securities and Exchange Commission (SEC) of the United States was the outcome of the 1929 crash of the stock market and the Depression. It was thought that the SEC will be an everlasting solution. Now there are the distant but starkly clear signs of the early stages of a crisis; a crisis that can occur if the various measures proposed and taken are not adequate and effective.

If we accept the nature of human frailty, we have to welcome the laws and regulatory mechanisms that are being introduced to curb corporate misconduct. But that alone would not suffice. If human frailty is at the core of these problems, Governments, regulators, professional bodies, trade associations and chambers must recognize the need for proper corporate conduct if society and the very people who intend to amass wealth to secure power through malpractices are to be protected.

These organisations should embark on a proper program of education that would lead to balancing human greed with responsible behaviour, credible conduct of business and integrity in business transactions. Integrity and the value of upholding principles of good governance should replace the corporate culture that had been bred from selfishness and avarice.

It is true that many individuals with low credibility have amassed wealth, hold influential positions in society, public sector and the business community and wield substantial power. Yet, there are many business leaders who exhort the value of credibility to achieve success in business and to build strong business relations with customers, suppliers, employees, creditors, equity providers and other stakeholders. Many are the success stories in business that encourage people in business to be credible, uphold commitments, be truthful and be courageous.

Educating the people on the virtues of such conduct is today's priority and the responsibility of every business leader, regulator and professional.

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