BUSINESS
10/26/2008 05:12 am ET | Updated May 25, 2011

The 2002 Warning About Wall Street

In contrast to dividends, Mr. Greenspan intoned, "Earnings are a very dubious measure" of corporate health. "Asset values are, after all, just based on a forecast," he said, and a chief executive can "craft" an earnings statement in misleading ways.

Speaking with a hard-edged frankness rarely heard in public -- and seeing that those assembled were not sharing his outrage -- Mr. Greenspan slapped the table. "There's been too much gaming of the system," he thundered. "Capitalism is not working! There's been a corrupting of the system of capitalism."

Mr. O'Neill, for his part, pushed to alter the threshold for action against chief executives from "recklessness" -- where a difficult finding of willful malfeasance would be necessary for action against a corporate chief -- to negligence. That is, if a company went south, the boss could face a hard-eyed appraisal from government auditors and be subject to heavy fines and other penalties. By matching upside rewards with downside consequences -- a bracing idea for the corner office -- Messrs. O'Neill and Greenspan hoped fear would compel the titans of business to enforce financial discipline, full public disclosure and probity down the corporate ranks.

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