The U.S. property/casualty industry's net income after taxes rose to $14.5 billion in first-half 2003 from $4.4 billion in first-half 2002, as both underwriting and investment results improved, according to Insurance Services Office Inc. (ISO) and the National Association of Independent Insurers (NAII). Reflecting the industry's income and unrealized capital gains on investments, its surplus, or statutory net worth, increased 9.9 percent to $312.5 billion at June 30 from $284.3 billion at year-end 2002. The increase in net income and the growth in surplus in first-half 2002 provide important confirmation of the industry's continuing recovery from the soft markets of the 1990s.

… The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — improved to 99.8 percent in the first half of this year, 5.3 percentage points better than the 105.1 percent a year ago. "The 99.8 percent combined ratio for the first half of 2003 is the best underwriting result for any six-month period since 1986, when our quarterly records begin.

Medco is one of several large pharmacy-benefit-management companies that arrange discounts on drugs and enforce cost-control arrangements for health plans that cover 150 million Americans. These companies would have an important role as intermediaries in delivering drugs to the elderly and disabled under proposals in Congress to expand the Medicare program.

According to the complaint, Medco vice presidents who ran mail-order pharmacies around the country were offered stock options valued at $1 million for management achievements that included meeting quotas for the number of prescriptions that their units processed each hour. To meet these goals, employees who reported to them often delayed or destroyed potentially time-consuming prescriptions that would require a call to a doctor's office, the complaint said. "Medco Health senior officials were aware of false reporting by individual mail-order pharmacies" in Tampa, Fla., Texas, Nevada and Massachusetts, it added.

A group of businessmen linked by their close ties to President Bush, his family and his administration have set up a consulting firm to advise companies that want to do business in Iraq, including those seeking pieces of taxpayer-financed reconstruction projects. The firm, New Bridge Strategies, is headed by Joe M. Allbaugh, Mr. Bush's campaign manager in 2000 and the director of the Federal Emergency Management Agency until March. … The [firm's web] site calls attention to the links between the company's directors and the two Bush administrations by noting, for example, that Mr. Allbaugh, the chairman, was "chief of staff to then-Gov. Bush of Texas and was the national campaign manager for the Bush-Cheney 2000 presidential campaign." … The company Web site says the company was "created specifically with the aim of assisting clients to evaluate and take advantage of business opportunities in the Middle East following the conclusion of the U.S.-led war in Iraq."

Of the $3.9 billion a month that the administration is spending on military operations in Iraq, up to one-third may go to contractors who provide food, housing and other services, some military budget experts said. A spokesman for the Pentagon said today that the military could not provide an estimate of the breakdown.

The number of people without health insurance shot up last year by 2.4 million, the largest increase in a decade, raising the total to 43.6 million, as health costs soared and many workers lost coverage provided by employers, the Census Bureau reported today. The increase brought the proportion of people who were uninsured to 15.2 percent, from 14.6 percent in 2001. The figure remained lower than the recent peak of 16.3 percent in 1998. … The proportion of Americans with insurance from employers declined to 61.3 percent, from 62.6 percent in 2001 and 63.6 percent in 2000. The number of people with employer-sponsored coverage fell last year by 1.3 million, to 175.3 million, even as the total population grew by 3.9 million. …The number of full-time workers without health insurance rose by 897,000 last year, to 19.9 million. Kate Sullivan, director of health care policy at the United States Chamber of Commerce, said the increase was alarming and predicted it would continue this year. … About 8.5 million children were uninsured in 2002. They account for 11.6 percent of all children under 18. … Despite the Medicaid program, 10.5 million poor people, or 30.4 percent of those in poverty, had no health insurance last year. This percentage, double the rate for the total population, did not change from the prior year. About 24 percent of all uninsured people were poor. … Among people living in poverty, 49 percent of those who worked full-time were uninsured. But middle-income households accounted for most of the increase in the number of uninsured. In households with annual incomes of $25,000 to $74,999, the number of uninsured people rose last year by 1.4 million, to 21.5 million, and the increase was most noticeable among households with incomes of $25,000 to $49,999.

Tommy G. Thompson, the secretary of health and human services, said the numbers showed that "the nation must do more" to help the uninsured. Mr. Thompson said, for example, that Congress should provide tax credits for the purchase of private insurance.

While running the company, Mr. Kozlowski liked to depict himself as a hard-nose businessman. But another side emerged after he was fired, including his champagne taste — among other things, he decorated his New York apartment with a $6,000 shower curtain and a $17,000 umbrella stand, apparently all paid for by Tyco — and his largess, at least toward his own family. And of course, there was a now-infamous multimillion-dollar birthday party that Mr. Kozlowski gave for his second wife — again on Tyco's bill — on the island of Sardinia, featuring waiters in togas and an ice sculpture of Michelangelo's "David," from which Stolichnaya vodka flowed into crystal glasses.

The incomes of the top 1 percent of Americans fell 18 percent in 2001, as did their income taxes, shaving $66 billion off revenues and showing how dependent the federal government has become on its wealthiest citizens. Over all, Americans had 2.8 percent less income in 2001 than in the previous year. But federal tax revenues fell 9.4 percent because the incomes of those at the top, who pay the highest tax rates, dropped so much more than the average.

The top 1 percent reported $1.09 trillion of income, down from $1.34 trillion in 2000, according to data posted by the Internal Revenue Service on the Internet yesterday without announcement. The minimum income to reach the top 1 percent was $293,000 last year, down from $313,500 in 2000, but almost identical to the threshold in 1999. … Taxes paid by the top group fell to $300.1 billion in 2001 from $366.9 billion in 2000. The decline accounted for the bulk of the $92.7 billion drop in individual federal income tax revenue in 2001.

This very top group, representing one in a thousand households, had $505 billion in income, for an average of $4 million each. To be counted among this group one needed an adjusted gross income of at least $1.3 million, down from $1.6 million in 2000. This small group received almost $1 of every $12 earned by all 129 million American households.

Over all, the tax rate fell, with Americans paying the government 14.2 cents in taxes on each dollar of income, down from 15.3 cents in 2000. Because spending did not decline, the government borrowed to make up the difference, in effect deferring the cost.

The number of Americans living in poverty increased by 1.7 million last year, and the median household income declined by 1.1 percent, the Census Bureau reported today. The worsening economic conditions fell heaviest on Midwesterners and nonwhites. It was the second straight year of adverse changes in both poverty and income, the first two-year downturn since the early 1990's.… The official poverty rate rose to 12.1 percent in 2002 from 11.7 percent the year before, bringing to total number of people living below the poverty line to 34.6 million. The median household earned income fell $500 over the same period to $42,400. Per capita income declined by 1.8 in 2002 to $22,794, the first decline since 1991. … The poverty threshold for a family of four is $18,392. For individuals the amount is $9,183. The percentage of people in severe poverty, those with incomes below half of the poverty threshold, increased to 14.1 million from 13.4 million.

"Thanks to the Bush administration's recent economic stimulus package, small businesses and the self-employed are eligible to deduct the entire purchase cost of new equipment up to $100,000 the year of the purchase. … The Hummer H2 qualifies for this IRS Sec. 179 deduction by its gross vehicle weight of over 6,000 lbs. Cars and medium sized SUV's don't qualify for this deduction … . If you are seriously considering acquisition of a new vehicle, step up to the vehicle that can take you where you want to be, financially and otherwise."

The stories [that unjust lawsuits are causing higher insurance premiums, which in turn drive doctors out of practice] can be compelling. But so, too, are relevant facts that sometimes get glossed over. Take, for example, a story that Dr. Donald Palmisano, president of the American Medical Association, has repeated several times. … To illustrate how the insurance crisis was affecting patients, Palmisano told a story about a 9-year-old boy in Wheeling, W.Va., who was knocked unconscious briefly at a football game. By the time the emergency room doctor saw him, the boy appeared to be fine. As a precaution, though, a neurosurgeon needed to examine and monitor the boy. But Wheeling, which used to have three neurosurgeons available for emergency calls, no longer had any. To the distress of the boy's mother, who had never been out of Wheeling, a medical helicopter took the child to Columbus for care. Palmisano left the impression that the Wheeling boy's predicament was a direct result of the malpractice insurance crisis.

… But in February 2001, the two daily newspapers in Charleston, W.Va., published the first of several stories offering details about the departed doctors. According to the Gazette and the Daily Mail:

• Before he retired in 1998 at age 61, Dr. Reza Parivash Asli was named in nine malpractice lawsuits in seven years. All resulted in payments to patients. Asli could not be located to comment for this story.
• Dr. Frederic Payne was named in 10 lawsuits in eight years before he stopped doing surgery in May 2000. Nine cases resulted in payments to patients. [Details of one malpractice omitted.]
• Dr. Christopher Marquart left Wheeling in November 2000 to join a neurosurgical consulting practice in Michigan. … Marquart had won one malpractice lawsuit in Wheeling and lost another. Not long before he left, he faced a third lawsuit for drilling a hole in the wrong side of a patient's head.

But his case - and his cavalier attitude - may be emblematic of a deeper problem in America: a culture that often turns a blind eye to, or even openly tolerates, risky driving. On the one hand, say experts, attitudes toward drunk driving and seatbelts have shifted dramatically. But speeding is another story. Since Congress repealed the national 55 m.p.h. speed limit law in 1995, drivers have been going faster, according to data from the Insurance Institute for Highway Safety. And with higher speeds, deaths go up.

The group was sounding much more rebellious a few days ago, but by a press conference Wednesday at the UN, all talk of impatience or dispute with the power paying the bills was silenced - or at least on hold. The speculation among skeptical journalists was that the Iraqis, led by Ahmed Chalabi, a former Pentagon protégé, got a talking-to.

Prefacing his remarks with an expression of gratitude to President Bush and the American people for "help[ing] us liberate ourselves from the scourge of Saddam Hussein," Mr. Chalabi said, "We have no disagreement with the US government."

That sounded different from earlier in the week, when Chalabi was saying - most notably in a front-page interview with The New York Times - that he wanted a faster transfer of sovereignty than what the US is proposing.

Just yesterday, Democrats seized on comments by Secretary of State Colin L. Powell -- still posted on the State Department's official Web site -- from Feb. 24, 2001, in which he told reporters during a trip to Egypt about the success of decade-old economic sanctions in containing Iraq. In his remarks, which were unearthed by an Australian journalist and broadcast on the BBC in Britain, Powell said Hussein "has not developed any significant capability with respect to weapons of mass destruction. He is unable to project conventional power against his neighbors."

The United States maintained its dominance in the international arms market last year, especially in sales to developing nations, according to a new Congressional report. The United States was the leader in total worldwide sales in 2002, with about $13.3 billion, or 45.5 percent of global conventional weapons deals, a rise from $12.1 billion in 2001. Of that, $8.6 billion was to developing nations, or about 48.6 percent of conventional arms deals concluded with developing nations last year, according to the report.

There are several reasons why unethical behavior has become so ingrained--and so hard to combat. Corporate leaders have increasingly become divorced from workers as executive pay has multiplied, a problem at both large and small companies. As a result, [David] Batstone [of Sojourners] says, many executives seem to have lost touch with bedrock ethical values.

In addition, according to Michael Lissack, director of the Institute for the Study of Coherence and Emergence, an ethics research organization in Naples, Florida, more Americans have come to rely on market forces rather than government to police ethics in recent decades, yet the market is not set up for policing. "When we say the market will handle ethics--the market will punish or not punish ethical problems--we divorce ourselves from responsibility for ethical decisions, and we get rid of government's function of policing ethics," Lissack says.

… More broadly, many social scientists believe American culture has actually come to celebrate dishonesty, which encourages lying and cheating in business. During the 1990s and early 2000s, as business leaders were exalted, greed and satisfaction were touted as positive forces in society because they supposedly led to greater returns for businesses and, in public companies, for shareholders. In 1996, a poll by Harris Research Group reported that more than 60 percent of Americans believed Wall Street was "dominated by greed," yet in the same poll, over 70 percent said Wall Street generally benefits America. Also during this time, a culture of charismatic superstar CEOs developed, in which chief executives were lionized for supposedly growing bottom lines, even if they used questionable means to do so.

[We have also become a cultural trend that worships success at all costs, including dishonesty.] Indeed, several ethics specialists say, as American society has become more wealth-oriented and more socially and economically competitive, antiheroes who deliver results but may play fast and loose with the truth have been celebrated. [Lies become a tool for obtaining satisfaction, which is equated with success, and any shortcut is permissible.]

Realistic budget projections show a fundamental, persistent, and growing shortfall of projected revenues relative to spending. This implies that the United States is on an unsustainable long-term fiscal path and an imbalanced medium-term path. Although the CBO baseline projectes unified deficits that average 1 percent of GDP and shrink over the next decade, realistic assumptions about current policy imply persistent deficits of in excess of 3 percent of GDP in the unified budget and in excess of 5 percent of GDP exclusive of retirement trust funds. Under reasonable assumptions about current policy, public debt will rise significantly and continually as a share of GDP over the next decade, and the full-employment deficit excluding the social security trust fund will remain near post-war highs as a share of GDP for the latter half of the decade. All budget projections deterioriate sharply and permanently after the current decade ends.

The deterioration in budget outcomes over the next decade is due largely to a decline in revenues relative to prior projections and relative to earlier years. Revenues are projected to be more than 1 percent of GDP lower in the next decade than over the previous 40 years, whereas spending is projected to be at its average share of GDP. Between January 2001 and August 2003, the projected budget surplus for 2010 declined by $941 billion, of which 43 percent is due to lower revenues and 15 percent is due to increased homeland security and defense spending. Net interest payments account--allocated in proportion to the two items above--account for 39 percent of the decline. Increased spending on all other items accounts for just 1 percent of the decline.

The Administration essentially has no policy to address these issues. It claims its policy is to cut spending and to cut taxes to make the economy grow. But it is raising spending, and even if its tax cuts raise growth--which most studies find to be unlikely--the effects on growth will be insufficient to offset the direct revenue losses, as even the Administration's own writings conclude. In other words, it is entirely implausible that the tax cuts are "part of the solution" to the projected budget imbalance, rather than part of the problem. A realistic policy response would (a) re-impose the budget rules that have expired, (b) trim spending, and (c) allow at least the bulk of the expiring tax provisions to sunset as scheduled and roll back some of the more egregious features of the recent tax cuts before they are scheduled to sunset.

The good news is that as of September 30, 2002, we had about $1 trillion in reported assets. The bad news is that we had almost $8 trillion in reported liabilities. According to my math, that left us with an approximate $7 trillion accumulated deficit, or a little over $24,000 for every man, woman and child in the United States. In fiscal 2002, the federal government reported a net operating deficit of $365 billion. Many of you may be more familiar with the unified budget deficit number, which was $158 billion in fiscal 2002. Irrespective of whether you focus on the accrual based accounting numbers or the cash based budget numbers, the picture is not good and it’s getting worse. For example, the Congressional Budget Office (CBO) estimates that the unified budget deficits in fiscal years 2003 and 2004 will be $401 billion and $480 billion, respectively. These numbers are up significantly from fiscal 2002. Interestingly, CBO estimates that we will incur about $157 billion in interest on publicly held federal debt in fiscal 2003 even though current interest rates are low on a relative basis. Furthermore, CBO estimates that, excluding Social Security surpluses, the total deficit for fiscal years 2003 and 2004 will be $562 billion and $644 billion, respectively. If all these numbers are making your head spin, don’t worry; just remember that they are all big, and they are all bad!

[T]here are a number of very significant items that are not currently included as liabilities in the federal government’s financial statements; for example, several trillion dollars in non-marketable government securities in so-called “Trust Funds.” In the case of the Social Security and Medicare Trust Funds, the federal government took in taxpayer money, spent it on other items and replaced it with an IOU. Given this fact, why aren’t the amounts attributed to such activities shown as a “liability” of the U.S. Government? At the present time, they are not!

The current U.S government liability figures also do not adequately consider veterans’ health care benefit costs provided through the Department of Veteran’s Affairs nor do they include the difference between future promised and funded benefits in connection with the Social Security and Medicare programs. These additional amounts total tens of trillions of dollars in discounted present value terms. Stated differently, they are likely to exceed $100,000 in additional burden for every man, woman and child in America today, and these amounts are growing every day.

In fairness, the federal government’s financial statements also do not include certain assets and rights held by the government. For example, the financial statements do not include any recognition of the federal government’s power to tax.

The bottom line is that, in my view, the federal government’s current financial statements and annual reports do not give policymakers and the American people an adequate picture of our government’s overall performance and true financial condition. This is a serious issue. As Thomas Jefferson once noted, an informed electorate is the basis for a sound democracy. But how can the American people and their elected officials make sound decisions if they aren’t given timely, accurate and useful information? … In this regard, earlier this year GAO was unable to express an opinion as to whether the U.S. Government’s consolidated financial statements were fairly stated for a sixth consecutive year.

The “bottom line” is, there is little question that deficits do matter, especially if they are large, structural and recurring in nature. In addition, our projected budget deficits are not “manageable” without significant changes in “status quo” programs, policies, processes and operations. … In less than 10 years, due primarily to the retirement of the baby boom generation, the United States will be hit by a huge demographic tidal wave that is not expected to ever recede!

It is true that additional economic growth can help us address our future fiscal gap. It is also true that some recent economic indicators have given us some hope that things may get better in the short-term. However, the consensus opinion at a recent meeting of prominent economists representing a wide variety of ideological viewpoints was that, as I stated in my speech during that meeting, “we cannot simply grow our way out of this problem!” In addition, we need to get started sooner rather than later so the miracle of compounding can start working for us rather than against us, as it is now.

While many members of Congress and other key policymakers and opinion leaders agree that we have a major fiscal challenge that must be dealt with, many do not want to talk about it publicly. Many believe that we will ultimately act to address this imbalance, but when will we start? Other nations have already started to address their long-range imbalances. When will we? Clearly, the sooner we start the better.

When Bush was stumping for his "jobs and growth" tax cut proposal in April, he went to Timken Co., a maker of steel bearings in Canton, Ohio. "The greatest strength of the American economy is found right here," Bush said then, predicting the tax cut would bring "more money for investment, more money for growth, and more money for jobs."

A month later, Bush signed a $350 billion tax cut, less than he wanted but still what he called "a bold package." And Timken? The company announced last week that it is cutting 900 jobs and lowering its earnings forecasts.

A weaker dollar generally helps U.S. manufacturers, and some investors might have expected the stock market to rally on the G7 news. But analysts said investors were worried about the potential negative effects of a weaker dollar in an already overheated U.S. stock market explained the drop yesterday. Japan holds down the value of its currency against the dollar by buying dollars, which it then invests in U.S. assets such as Treasury securities. If Japan were to stop buying large amounts of Treasurys, some investors fear, it might cause their prices to fall, which would cause their yields, and many other U.S. interest rates, to rise. "You could significantly hurt the consumer sector of the economy," said Bernstein [Chiefq US strategist of Merrill Lynch], noting that consumer spending makes up two-thirds of the economy.

Al Goldman, chief market strategist at A.G. Edwards, said a faltering dollar also makes U.S. stocks less tempting for foreign investors. "They can lose money in two ways," he said, since a falling dollar reduces the value of their investment and the stock itself could still sink.

Tim Hayes, global stock strategist at Ned Davis Research, cautioned that currency swings always create winners and losers. While a weak dollar may help some U.S. multinational companies by making their products more competitively priced worldwide, U.S. importers would be hurt by dollar weakness, he said.

And a lower dollar can hurt overseas economies, Bernstein said. "We can argue that we're making ourselves more competitive in weakening the U.S. dollar, but you might put other countries into recession. Then who demands your goods?"

The past few decades have been very good for the people on top in this economy and particularly on the top in industry. In 1980 the ratio between what an average hourly worker and an average CEO earned was 42 - meaning the average CEO makes 42 times as much as the average hourly worker. In 2001 that ratio was 411. The average CEO salary in 2003 is $10.8 million according to The New York Times. … Is it class warfare to suggest that [rising CEO pay was not due to great work by the CEOs but instead was due to a convergence of evence and cycles that allowed the economy to grow like mad]? Is it class warfare to suggest that maybe, after all the smoke is cleared around the NYSE situation, someone else can come in and run the market as well as Grasso for significantly less pay? Those are just a few questions. [T]here is another question. If the board of the NYSE believed $140 million was fair compensation for Grasso - even as US companies ship jobs overseas to find cheaper labor - who is it that fired the first shots in the class war?

An oligopoly differs from a monopoly in that no one firm can control the market price of a product merely by altering its own output. Where a market is highly concentrated, however, it is possible for sellers to share market power sufficient to control prices by recognizing their shared economic interests and their interdependence with respect to price and output decisions. … Thus, the distinctive characteristic of oligopoly is recognized interdependence among the leading firms: the profit-maximizing choice of price and output for one depends on the choices made by others.”

… [C]onscious parallelism is the practice of interdependent pricing in an oligopolistic market by competitor firms that realize that attempts to cut prices usually reduce revenue without increasing any firm’s market share, but that simple price leadership in such a market can readily increase all competitors’ revenues. … Thus, these behaviors typically result from firms’ rational recognition that the market structure in which they operate will most easily yield profits by means other than price competition. [Emphasis added.]

When they are the product of a rational, independent calculus by each member of the oligopoly, as opposed to collusion, these types of synchronous actions have become known as “conscious parallelism,” … “the process, not in itself unlawful, by which firms in a concentrated market might in effect share monopoly power, setting their prices at a profit-maximizing, supracompetitive level by recognizing their shared economic interests and their interdependence with respect to price and output decisions.”

As numerous courts have recognized, it often is difficult to determine which of these situations -- illegal price fixing or conscious parallelism -- is present in a given case. This is largely attributable to the efforts typically made by those who fall on the wrong side of this line to disguise the illegal nature of their endeavors.

[To avoid having the case summarily tossed out of court,] a plaintiff seeking damages for [collusive price fixing] . . . must present evidence that tends to exclude the possibility that the alleged conspirators acted independently. … Evidence that does not support the existence of a price fixing conspiracy any more strongly than it supports conscious parallelism is insufficient. … [A]ny showing by [such plaintiffs] that “tend[s] to exclude the possibility of independent action” can qualify as a “plus factor” [that avoids throwing the case out of court.] [Emphasis added.]

The imposition of free-market reforms in Iraq has long been a goal of the Bush administration. The decision to enact the changes now is part of an American effort to accelerate the recovery of Iraq's decayed economy, which U.S. officials hope will help promote stability. But Snow warned, as many independent analysts have, that the restoration of security in the country is an essential prerequisite for economic recovery.

… Iraq's new finance minister, Kamil Mubdir Gailani, … said Iraq would "allow up to 100 percent foreign ownership in all sectors except natural resources." He said Iraq's oil reserves -- the world's second largest after Saudi Arabia's -- would remain in government hands for now. Other Iraqi officials have said decisions on privatizing the oil industry, which is forecast to generate $14 billion in revenue next year, would be decided after a democratically elected government is seated. … Some Iraqi businessmen have expressed concern that well-capitalized foreign firms will enjoy an unfair advantage and siphon profits out of the country.

The slumping American economy has proved to be a boon to the Army's efforts to recruit the 100,000 enlisted soldiers it says it needs this year to fill its active-duty and reserve ranks, senior Army officials say, so far relieving concerns that the turmoil in Iraq could crimp new enlistments. … "That's the driver, the economy," said Maj. Gen. Michael D. Rochelle, the head of the Army Recruiting Command here, adding that the chaotic conditions in Iraq have yet to hurt recruiting. … "They are seeing the facts and the world situation, as well as the domestic implications of the economy, job opportunities and prospects, and the opportunity for higher education, which are impacted by rising tuition costs," he said.

Legal philosophers have long debated whether there is such a thing as natural law — higher principles of fairness that trump the rules enacted by man — and if so, from where it is derived. To natural law proponents like St. Augustine, who said an unjust law is no law at all, the answer was God. The capuchin monkey study suggests, however, that part of the answer may be biological. It hints that, as Mr. de Waal puts it, "a lot of the notions we use in our moral systems are much older than our species."

None of this, of course, means human society is destined to be fair. We are also hard-wired for competition and aggression. And we have a tendency to establish societies in which, as Shakespeare observed, "to do harm is often laudable, to do good sometime accounted dangerous folly." But the capuchin monkey study suggests that fairness is at least part of the mix of traits that go with being human — and that over time, higher notions of justice that look beyond mechanical application of rigid rules may have a fighting chance.

[A] critical theme runs through the disparate events that sent Enron and WorldCom into bankruptcy and that cost the exchange's longtime boss, Richard A. Grasso, his job last week: All can be traced to a failure on the part of a board of directors to handle its responsibilities, legal and financial experts said. [The ideal of corporate governance involves close oversight by directors over the managers of a business.] But often, the reality is far different. The board chairman, who is the top director, is often the chief executive, or top manager, as well. Boards themselves are frequently packed with the chairman's friends and associates, who are unlikely to be rabble-rousers. In the end, such directors, corporate governance experts said, are likely to trust their friends and approve management's ideas with few objections.

… At Enron, directors approved a program to lock in the value of the company's investments, even though few of them understood it; the program ultimately helped drive the company into bankruptcy. At WorldCom, directors approved a loan package for its chief executive, Bernard J. Ebbers, without fully realizing that the company was pouring hundreds of millions of dollars out the door to him. At the exchange, directors approved a pay package that provided Mr. Grasso with $139.5 million in deferred pay and retirement benefits. Directors now say they did not understand how much money they were actually committing to Mr. Grasso. … But beyond the conflicts, Big Board governance has also been undermined for years by secrecy. With a small group of people running the board — most with backgrounds in the clubby, moneyed world of finance — an objective assessment of the appropriateness of Mr. Grasso's compensation would have been even harder to come by. "When you get people on the board who are controlling the decisions on things like this, who have hundreds of millions or billions of dollars, they seem to lose perspective on reality," said Russell S. Reynolds Jr., chairman of The Directorship Search Group Inc., a corporate consulting firm.