businesses have to return to living in the real world

"The recent fall in the world’s stock exchanges is a logical consequence of five years of hype which has seen price/earnings ratios escalate to the point where the capitalization of companies has reached unrealistic levels. It was inevitable that sooner or later businesses living in the virtual world would have to return to the real world where profits result from actually producing and selling goods and services and not manipulating accounts. What the Enron and other scandals have demonstrated is the unhealthy relationship between accountants, investment banks and advisers, lawyers, non executive directors, remuneration committees and chief executives of major public corporations whose prime objective was to increase the share price by whatever means.

They have exploited the companies they are supposed to serve by helping themselves to salaries, pension entitlements, bonuses, stock options and fees out of all proportion to their work or achievements. And when this systematic pillage results in mega losses and thousands of lower-grade staff are laid off with minimum handouts, those at the top still manage to retain their substantial perks, even if, as in some cases, criminal charges have been brought against them.

A radical change is needed. The leading pension funds, who constitute the major shareholders, acting on behalf of millions of future pensioners, must share some responsibility for the current state of affairs. If they are incapable of controlling the excesses of boardrooms, then the Government must act to ensure companies operate in a more open democratic environment and in the interests of their shareholders.

Salaries, stock options and bonuses must be linked to performance over a medium to long period and should include lower-grade employees. Failure or loss of office should not be a guarantee of million-pound payoffs and fat pensions.

Professional advisors should be independent and their fees agreed by shareholders each year."