Free enterprise is everyone's responsibility. (Perspective).

When Enron collapsed, lawmakers and watch-dog agencies wanted to examine issues such as security fraud, accounting irregularities, and handling of the company's employee 401(k) plans. But the bigger concern about Enron was whether its situation was an isolated incident or evidence of systemic failure that might threaten the most basic requirement of our economic system: corporate credibility.

Now that question seems to be answered by almost weekly announcements of questionable management and, in some cases, possible illegal practices by highly educated, networked, placed, valued, and compensated corporate executives. Cleverly named firms such as Global Crossing, Qwest, Adelphia, ImClone Systems, and World-Coin lead the list in an evolving crisis--and perhaps a defining moment for our nation.

But if this issue is so important, why is it only our government and its agencies that shall investigate and attempt to correct what went wrong with these companies and our system?

A piece of the responsibility

America's founding fathers, seeking new freedoms and a better way of life, created the free enterprise system that underpins more than our commerce--it is our way of life. But such a free system comes with a great measure of personal responsibility. Everyone who touched Enron, WorldCom, and other such companies shares a piece of that responsibility.

Enron's former chairman and CEO, Kenneth Lay, and WorldCom's former CEO, Bernard Ebbers, had been highly involved in their companies for years--surely sufficient time to thoroughly understand the strengths and weaknesses of their organizations. Why no earlier warnings from the top?

And if such leaders couldn't--or didn't want to--blow the whistle, what about their key financial staff? Could they not fathom their employers' problems--or were they the problem?

And why did Arthur Andersen, Enron's outside auditing firm, wait until early November to notify the Enron board of directors of possible illegal acts? Similarly, how could Andersen certified public accountants (CPAs) spend any reasonable amount of time at WorldCom, auditing its books and speaking to key staff members, and not discover such basic fraud as the reclassification of expenses as capital investments to show inflated profits?

And if all these people dropped the ball, what about the companies' boards of directors? Where was their oversight? They have an absolute fiduciary responsibility to shareholders, not to mention to our free enterprise system.

If we cannot depend on highly placed people, what about other employees who dealt with accounts payables and receivables, reviewed sales reports, and saw what was delivered and what wasn't? Didn't anyone know that something was wrong? Is not the silent subordinate just as responsible as the defrauding executive?

Outside the company, what about those highly paid, cuff-linked executives from Wall Street who can predict a company's earnings per share almost to the penny? Where were they when we really needed them?

The financial press also let us down. As recently as October 2001, Money published the fatal Enron-buy recommendation of Janus fund manager Blaine Rollins. As Enron's largest shareholder, did Janus really believe that Enron was ". . . still posting 20-30 percent earning growth," as Rollins told Money only days before everything collapsed? We must ask again, where was everybody--especially these so-called experts so many of us depend on? How could all of these well-intentioned boards; auditors; and long-standing and dedicated employees, stockbrokers, analysts, the financial press, and others miss the signs that big problems were in these companies' futures?

The financial ripples go well beyond lost jobs, decimated pension savings accounts, and evaporated stock portfolios. This series of debacles has had a secondary impact on thousands of investors, many of whom did not even realize that they had holdings in such companies as part of their mutual funds.

While we speculate as to whether the people involved in the day-to-day operations were incredibly stupid or intentionally deceitful, the real question is: Why didn't our system protect or, at a minimum, warn the public? And, have we reached the point at which only federal regulators can be trusted with this responsibility?

Doing our part

Legal penalties imposed on corporate officers found guilty of illegal practices are not enough. And, as we have seen, such executives are probably less likely to go to jail or stay in jail as long as someone who steals a beat-up '88 Chevy. I say that we all bear some responsibility to protect and reinforce our free enterprise system. Even modest but visible and symbolic actions can convey that we, as participants in and beneficiaries of the free enterprise system, don't like what has happened and will not let off the hook those responsible.

For example, if the chamber of commerce membership department is inclined to merely continue to send out the annual dues invoice to a member proven guilty of fraud, why not encourage the local or national chamber board to contact the wayward corporation and ask why the company membership should not be suspended or cancelled? What about trade association memberships--will they be handled similarly? And are there lawyers and CPAs who are as outraged as I am who will ask their professional society why the CPAs and attorneys involved in these matters should not deserve to lose their professional licensure?

At the same time that many people are demanding the heads of such officers, are executive headhunters already promoting them to someone else? Or, as a matter of policy, will the Russell Reynolds Associates, Spencer Stuarts, and Korn/Ferrys of the world refuse to help place these abruptly unemployed senior executives until all is clearly understood?

And should these people be allowed, now and in the future, to sit on other corporate or public boards?

At many country clubs, if you don't wear a collared shirt, play too slow, or take a big divot without replacing it, you can be severely reprimanded, regardless of who you are. But what happens when the same executive takes a big divot out of our business community's confidence with conduct representing something less than good-faith dealings?

In most police departments, good officers feel honor bound to report colleagues who violate the code of conduct. Don't we, as the men and women who benefit from our free enterprise system, have a similar obligation to show our displeasure and object in any reasonable way we can when we see a company or its officers violating the written and unwritten rules of business?

The responsibility for the front-line defense of our free enterprise system rests with us-businesspeople--not with government agencies. We must audit and sanction our own. The free enterprise system and our way of life are too important to ask for anything less.

Michael R. Losey, CAE, senior professional in human resources, is an executive consultant and retired president and CEO of the Society for Human Resource Management, Alexandria, Virginia. E-mail: [e-mail].