The January/February 2008 issue of Corporate Board Member magazine features a picture of Dennis Kozlowski on its cover and asserts in its cover story tag line: "Why giving convicted executives decades in prison makes no sense."

The story itself mentions over a dozen recently convicted executives serving long sentences for fraud, including Bernie Ebbers, former CEO of WorldCom, 66 years old (25 years in Oakdale Federal prison in Louisiana); Walter Forbes, former Chairman of Cendant, 65 years old (12 years in Allenwood federal prison in Pennsylvania); Sanjay Kumar, former chairman and CEO of Computer Associates, 45 years old (12 years in the federal correctional facility at Fairton, New Jersey); John Rigas, 83 years old, former chairman and CEO of Adelphia Communications (15 years at the Butner federal facility in North Carolina; Jeffrey Skilling, former Enron CEO, 54 years old (24 years at the Federal correctional institution in Waseca, Minnesota; and Kozlowski-sidekick Mark Swartz, former CFO of Tyco, 46 years old (up to 25 years in state prison in Rome, New York). Swartz, like Kozlowski, is eligible for parole in 2013, and they are both two years into serving their 25 year sentences.

One of the main points of this interesting article follows:

"The overarching problem with multi-decade sentences for nonviolent crimes like fraud and drug possession is that they seem disproportionate to the goals prison sentences are supposed to achieve: penitence, deterrence, restitution, and retribution.  Does life without parole for a white-collar offender– or 25 years for a single drug offense– really accomplish these things any more effectively than, say, three-to-five-year sentences?  Perhaps in some specific cases, but surely not in all."

As I read the article, written by Rob Norton, I felt that it made many good points but that considering drug offenses and finanical fraud in the same construct detracted from some of the more powerful arguments for reform. 

In my view, the punishment meted out to individuals guilty of massive corporate fraud should be considered in a class of its own.  Where I think that the author falls short in this article is in failing to consider the fact that with great power comes great responsibility.  Corporate CEOs and other senior managers hold the financial futures of many thousands of people in their hands– they are the stewards of the retirement plans for the generations of employees that may have preceded them, as well as of the financial security of the company’s current employees and the investing public.  Many CEOs are responsible for corporations that have higher incomes than the GDP’s of most countries in the world.

The fact is that too many CEOs have approached their responsibilities in a cavalier manner and ignored their roles as stewards of the public trust.  Should this be treated any differently than the commission of a violent crime against an individual? Yes.  But the magnitude of corporate fraud may impact thousands of families and ripple through many lives in ways that never come to light during trial.

Dennis Kozlowski states in this article: "I’m serving a worse sentence than many murderers, rapists, and child molesters.  Another thing, I was convicted of stealing my bonus.  Well, I never got it.  It’s still in Tyco as deferred compensation I never collected.  It’s like finding somebody guilty of bank robbery when the money is still in the bank."

I believe that Dennis Kozlowski’s deferred comp may have recently left Tyco headquarters as part of the $3 billion class action lawsuit settlement agreed to be paid by the company last month.  I also doubt that he plans to try collecting it in 2013 if he makes parole.  More importantly, most rapists and murderers aren’t sufficiently achievement oriented or psychologically stable enough to be afforded the kind of power and public trust that Dennis Kozlowski received in the first place.

I do agree with the underlying premises of the article– that there is plenty wrong with our prison system, that it is overpopulated, and that rigid sentencing guidelines should be revised to give judges greater latitude in individual cases.  But I also feel strongly that senior corporate officers must be given powerful reasons to think long and hard before making the choice to cross the line into white collar crime.  Perhaps the headline-grabbing examples of these recent harsh sentences will help future CEOs and other senior executives consider the privilege of their positions and their stewardship obligations as corporate titans more seriously before they choose to pursue misguided visions of entitlement to the excess riches that attend powerful executive positions.

   

   

Related posts:

1. Building a High Performance Board and the Duty of Care
2. Dennis Kozlowski, Mark Swartz, and “the Niceties of Corporate Governance”
3. Missing the Point– WSJ Reports on Splitting the Chairman and CEO Roles in Public Companies
4. Most Public Company Boards Conduct Full-Board Evaluations and Find Them Effective
5. Joining the NVCA Board of Directors

This entry was posted on Monday, January 7th, 2008 at 10:52 am and is filed under Adult Education, Corporate Governance, Entrepreneur, Leadership Profiles, Working Group on Director Accountability. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.