THE RISE OF THE ROGUE EXECUTIVE

Sickened by the Enron scandal? Wondering how Martha Stewart made sense of her stock-market shenanigans? Wish we could prevent another Bernie Ebbers? Smith and Sayles have the answers.

The corporate scandals of the last few years, say Smith and Sayles, can't be blamed on government interference or a handful of criminals. Rather, there are structural and systemic problems inside executive offices that have allowed, and even encouraged, malfeasance. One such structure is the rise of executive stock ownership. Over the last decade, CEOs have been making decisions that affect both their companies and their personal fortunes. New computer technology has allowed execs to engage in sleight-of-hand with increasing ease, and journalists and academics have been slow to criticize deeply corrupt practices. But all is not lost. If, as one prophetic chapter title declares, "We Nearly Lost American Capitalism," there are actions Americans can take to clean up the system?specifically, better education in the basics of finance and accounting. We also must rethink those alluring executive compensation plans, and we must check our individualism with a good dose of social responsibility and common values.

This is a business book with profound implications for all Americans?thankfully, Sayles and Smith have abandoned jargon and written clearly, so that even someone who doesn't know a stock from a bond could understand their arguments.