Scapegoating Ebbers Wont Cure Telecom Corruption

Opinion: Ebbers deserves every minute he's going to get in prison. But the high-profile prosecution of a few CEOs does more to satisfy the public's cries for blood than to correct the rotten practices on which the industry relies. (

When Mississippis favorite son, Bernard Ebbers, was sentenced to 25 years in prison for his part in the Worldcom/MCI debacle this week, it seemed to be a worthy blood sacrifice to the many tens of thousands of people who suffered at his, and his companys, hands.

The clamor for sacrifice was focused on Ebbers himself. While he is a worthy target for mass ire, as CEO he is also a surrogate for an entire industry, the business standards of which are built on a foundation of vapor, the cancerous model of expansion as an end itself, and a complete lack of accountability to customers, partners, employees and the nation that grants its licenses to operate.

Ebbers is the fall guy, but the criminals that set up the whole scam are the telecommunications industry and its Wall Street cronies.

Ebbers sentence was the most stringent yet delivered in the series of showy parade trials of popular CEOs of the 1990s, who were worshipped as heroes of Olympian significance during their ascendance.

/zimages/2/28571.gifA new RBOC ally jumps into the telecom-reform fray. Read more here.

I dont think its a bad thing that he got this sentence—in my opinion, he deserved to be held accountable. What I find extraordinary is that his mix of corporate misfeasance and malfeasance is markedly lower than many of the others who were once idolized.

Ebbers transformation from hotel chain operator to long-distance service provider in 1983 was triggered by the Reagan-era telephone deregulation.

That disruption of the telecom status quo provided a starting point for many entrepreneurs, some of whom saw an opportunity to try to create something new out of nothing, some of whom saw an opportunity to enter a field without formed regulations or even etiquette that would constrain the drive for pelf.

The simultaneous loosening of financial accounting standards in telecom and elsewhere made telecommunications an attractive line of work for people who like to play with intangibles as assets, for accountability sloughers, for empire builders and outright get-rich-quickers.

And once that happened, as in many unregulated endeavors, the industry devolved from a capitalist engine of creation into a Commons.

If you havent read The Tragedy of the Commons, click here; the model describes why so many organizations have so much incompetence at the top and why quality is not a competitive factor in many fields; and if you think the telecom industry is not a prime example, ask two dozen acquaintances if they love their mobile service provider.

/zimages/2/28571.gifClick here to read about senators demands for more scrutiny of telecom mergers.

In a Commons, ethics, quality products and service, and the ideal of building a multigenerational business all make a competitor less likely to survive, while creative accounting, tax evasion and pimping the customer all build competitive strength.

Poisoning the environment further during the 1990s was the focus on being "first to market" and preempting competition through acquisition. Compound that with extremely slack accounting standards and you turbocharge the telecoms tendency to attract Corporate Raiders Gone Wild.

/zimages/2/28571.gifRead the full story on Scapegoating Ebbers Wont Cure Telecom Corruption