Financial scandals have exposed a moral deficit behind business success, writes Claire Shoesmith

Corruption and scandal in the business world used to be something you associated with dodgy dealings in offshore accounts by rich bankers domiciled in the Caribbean. That is, until Enron and WorldCom came along.

It is not, of course, the existence of the companies themselves that I am talking about. It is the fact that, over the past few years, what were once celebrated as two of the world's most successful companies have been exposed as corrupt organisations, run by fraudsters who lined their pockets with millions of dollars while destroying billions of dollars of investors' money.

What makes it worse still is that these are not the only companies that deserve having a finger pointed at them for letting their moral and ethical values slip.

Many of America's biggest banks played their part in what are two of the largest financial scandals in US history. Top executives of the companies, themselves once heroes in their business, face years in jail for the roles they played.

Still, it is not only large American corporations that have committed such offences and there is no room for complacency. Several home-grown names, including AIB and National Irish Bank, have played their part in eroding public trust in the financial sector and, in turn, prompted calls for tighter rules on corporate governance and increased scrutiny on individuals within the industry.

"Ethics in business is not all about financial wrongdoings in large corporations," says Tom Hefferson, chairman and founder of DMG, a Dublin-based document management company, and a speaker at this weekend's business ethics conference in Dublin.

"Ethics is something that stretches right down to the way you treat your staff and colleagues on a day-to-day basis."

While it sounds very idealistic, following Hefferson's motto of treating others as you would like to be treated yourself can, he says, bring commercial advantages to your business.

His own company, where he practices the advice he preaches, has seen annual growth of 30 per cent each year for the past three, something he attributes to the contentedness of his 200 staff.

"It's simple," he says. "Do unto others as you would have them do unto you. If you really follow that, then everything you do in business will always be ethical."

The idea of adhering to ethical values at such a local level in business is something supported by Pat Werhane, a lecturer in business ethics and founder and editor-in-chief of Business Ethics Quarterly.

She has been teaching the subject for many years and cannot stress enough the importance of telling the general public about the problems of unethical behaviour in business.

"When you look at the scandals we have had, people say, 'oh those are really bad people', but what I see more clearly than that is that the background to these people is not bad. Many of them are good financial, religious people. It's just that their ethics seem to go out of the window when it comes to business," she says. "This is wrong."

"What we need to do is name and shame these people that have done the wrong and show that wrongdoers can't hide any more," says Werhane.

Bernie Ebbers, the former chief executive of WorldCom, is serving a 25-year jail sentence after being found guilty of leading the $11 billion (€9 billion) accounting fraud at the telecommunications group.

Kenneth Lay, the chairman of Enron, is still awaiting trial and, this week, Dennis Kozlowski, the once larger-than-life head of industrial conglomerate Tyco International and his former chief financial officer Mark Swartz were this week sentenced to between eight-and-a-third and 25 years after being found guilty of 22 counts of grand larceny, conspiracy, fraud and falsifying business records.

The pair, who were found to have stolen more than $150 million from the company, were also ordered to pay restitution to the company of around $134 million. Kozlowski was also fined $70 million and Swartz was fined $35 million by the state.

More locally, as recently as July, Paul Appleby, the State's director of corporate enforcement, went to the High Court to seek the disqualification of nine former managers of NIB over their involvement in an overcharging and tax evasion scandal at the bank in the 1990s.

Clamping down on wrongdoing in Irish business is what Appleby's job is about. Through the Companies Act, he made 66 convictions against company directors in 2004. This followed 43 convictions in 2003.

He said he expects to see a decrease in convictions this year, but a substantial increase in disqualifications. "Disqualification will be a new feature of clamping down this year," he says, adding there would be more convictions. "The Companies Act is a fundamental part of the corporate code and we need to encourage compliance."

He also said it was part of the job of his office to make businesses aware of what they were legally obliged to comply with and had launched an information campaign to do just that.

"It's an area which is likely to be an ongoing issue and we will continue to work on soft measures such as information campaigns as well as the hard edge of enforcement," he says.

By making people aware of what they need to do, he said he hoped to avoid any knee-jerk legislative reaction, whereby laws are created unnecessarily.

Werhane agrees, expressing her dislike of the new Sarbanes-Oxley legislation which has been introduced in the US as a result of scandals like Enron.

"We have plenty of legislation already and people always find a way to get round it, so I can't see any point in introducing any more," she says. "What we need is pressure pressure and more pressure."

One solution, according to Gabriel Flynn, a priest in the Diocese of Meath and organiser of the conference, could be to establish an ethics council which would be required to report to the Taoiseach each year on key ethical issues for the economy, with recommendations on policy.

Still, while something like this is probably a long way off, this weekend's conference will help to do what all the experts agree is needed - raise the profile of ethical behaviour in business and move it up the business agenda of the Irish economy.

"There is no room for complacency," says Flynn, "This is something we can all play a part in."