Issue link: https://www.e-digitaleditions.com/i/59185
In fact, neither case is true. short, management often turns up the heat. That can cause people to behave badly and do the wrong things. In our case, we tell the Street that we will do our best every day to optimize our share- holder value and do it in the right way. Then, the num- bers will be what they're going to be. In your roles as chairman for The Business Round table's Corporate Governance Task Force and as a member of its Institute for Corporate Ethics, what do you think are the most important issues you have to tackle? Today, we're still seeing the backlash from corporate scan- dals, with people calling for more and more regulation. I think some of these improvements in corporate governance are good, and I've supported them in my role on The Business Roundtable. On the other hand, we have to make sure we don't slay the goose that laid the golden egg. There are about 15,000 public companies in the U.S. alone, and the scandals over the last few years have involved only a handful. It's unfortunate that a few bad apples have spoiled the reputations of everyone. Society is becoming so litigious—here in Florida there are radio commercials from attorneys' offices saying, "If you've lost $1,000 in the stock market, call us today, and we'll sue for you." It's tough for a company to create wealth if it's con- stantly in fear of being sued. Take the drug industry. Merck lost its first round in the case about Vioxx last year. Every drug has its risks, but the Federal Drug Administration was set up to view the evidence and weigh the risks. If every FDA- approved drug is still subject to litigation, and a company like Merck risks losing a $256 million jury trial when an individ- ual is affected, there will be no new drugs. There will be no advances in medicine. These are the unintended conse- quences to rampant regulations and judgments. Business students need to understand how important it is that we all self-govern. We must keep the public's trust in our system. We need to make sure that good people prevail and bad people are not allowed to bring about these scandals. Not all students will work on Wall Street, but many will be executives in publicly traded companies. What skills do business students need to navigate the responsibilities of working for a listed company? At the risk of stating the obvious, I think it's very important for business students to understand why there are publicly traded companies. If all companies were private, wealth would be concentrated in very few hands. We would be at the dis- cretion and whim of the very few people who owned private companies. Public companies allow broad ownership of the private sector by the general population. So many people keep saying, "We want the govern- ment to do something for us." But that statement illustrates a lack of understanding of economics. Government is funded by the private sector, which makes up 85 percent of the econ- omy. All wealth—whether it's in pension plans, Social Security funding, or other retirement accounts—is created by the pri- vate sector. The ability to invest in the private sector through public companies brings capital into the marketplace and allows wealth to be created. Business students may not under- stand that context of the roles these companies play and the roles they will play in fueling our economy. What's the danger if they fail to understand that context? They won't un der stand how important it is that companies be allowed to succeed and fail. The simple fact is that if some people didn't lose money in the marketplace—if there weren't the possibility that stocks go down—there would be no opportunity for anyone to make any money in the stock market. For wealth to be created, wealth must also be lost. Companies must go bankrupt; there must be winners and losers. It's that balance that drives the dynamic of com- petition. It's that balance that drives companies to innovate, to create new things, new inventions, and new technologies. Business students need to understand this world and the nature of wealth generation. They need to understand why business is so important. Then, they need to be more than just businesspeople. They need to be advocates of free enterprise. How would you advise business students to prepare for their careers? Business school—both undergraduate and graduate—provides a foundation, but business students will need to build the structure on top of it. On-the-job experience is required, so that you understand where your best fit is from an industry and cultural standpoint. People can be highly successful in one company, if they're a cultural fit. They can be very unsuccess- ful in another company in the same industry if they're not. Students can follow many different paths in business, but they need to find careers at which they can be exceptional. They can be good at many types of work, but it's essential that they find what really excites them. Business is a mara thon. They'll have to get up every morning and go to work from the beginning of their careers until they retire. They need to make sure they're inspired by it. s z BizEd JANUARY/FEBRUARY 2006 21