Once there was an old man who loved to fish. His house was near a lake, and one evening after dinner, the old man went down to the shore with his fishing pole and bait. He rowed his boat to the middle of the lake, set his anchor, put bait on his hook, and tossed his line into the water.

He waited, then suddenly, his fishing pole was bent and shaking with the weight of a big fish caught on his hook and struggling to break free. The old man tugged and reeled and finally hauled the fish into the boat. To his surprise, the fish was covered in shining golden scales. Even more surprising, the fish could talk!

"Please let me go," the fish begged.

"No, I'm going to eat you," said the old man.

"Please, please let me go," said the fish. "If you do, I will give you a golden rope."

"A golden rope? Is that so?" said the old man. "How can I trust you?"

"Put your fishing line into the lake and in a few minutes there will be a golden rope caught on your hook," said the golden fish.

The old man dropped his hook back into the water. A few minutes later, he pulled in his line and found a thick rope of shining gold attached to his hook. He pulled more and more of the dripping rope from the water, but there was no end in sight.

"The golden rope must be very long," said the old man to himself. He kept pulling, and soon the rope lay in heavy coils that covered the bottom of his boat.

"Let me go, now that you have your golden rope," begged the fish again.

"No," the old man said. "I'll sell you, and someone will pay a very high price for you."

He put the golden fish into a bucket of water and kept pulling on the golden rope, still with no end in sight. Intent on his treasure, the greedy old man did not notice that his boat was sinking beneath the weight of the glistening coils. Finally, the boat was swallowed by the lake, and the old man drowned.

An Epidemic of Greed

This Chinese folk tale is relevant to the current epidemic of greed, corruption, and failed leadership that has permeated nearly every industry and aspect of our lives. Our boat is sinking, and we will all drown beneath the cost of fraud and greed unless we drastically change our ways.

If you want to pooh-pooh the problem, or believe that corporate scandals like the ones at Tyco, Enron, WorldCom, and Adelphia are old news, get your head out of the sand! Fraud results in financial losses each year that equal 6 percent of the U.S. Gross Domestic Product. That's an expense greater than the United States has paid for the Iraq and Afghanistan wars combined!

This epidemic is so sweeping that many believe it's the beginning of the collapse of corporate America. It has eroded the respect and reputation that American business leadership once enjoyed in the industrialized world. Today, other nations refer to the American system as "brutal capitalism." In fact, the constitutional crisis in the European Union has its roots, many believe, in Europeans' rejection of the "Americanization" of their economy.

The terrible effect of the ethical crisis in America's businesses on our global reputation is immeasurable. However, we can measure, as an indicator, the consequences brought about by a few bad actors at a few companies including Enron, WorldCom, Tyco, Global Crossing, and Adelphia. This group of thugs stole more than $3.3 billion from a handful of public companies for their own personal gain, leaving in their wake more than 100,000 employees who lost their jobs and several thousand retirees who were forced back to work. Thanks to the greed of these executives, the stock market crumbled a few years ago into the longest bear market since World War II, and while it has since recovered most of its losses, it's still sluggish and nowhere near what it might have been if it hadn't lost momentum.

Years of solid corporate performance can be wiped out overnight when a case of corporate fraud is exposed. In addition to falling stock prices, loss of market share, and the cost of shareholder litigation, there are other costs more difficult to tally: a damaged brand identity; the loss of stakeholder goodwill toward the organization; drops in employee morale and productivity, which plunge even further as the company is dragged through the headlines.

The Bermuda Triangle of Fraud

White-collar crimes are only the tip of the iceberg. Smaller-scale fraud, or occupational fraud, is one of the fastest-growing risks in business today. The accounting firm KPMG, which surveyed more than 450 large U.S. public companies in 2003, reported that 75 percent of respondents had uncovered fraud within their organizations in the prior 12 months. This compared with 62 percent in 1998. Asset theft and expense account abuse more than doubled in the past five years, according to the survey.

I could add examples of the cost of corruption in sports, government, religious organizations, education, politics, and journalism, but my comments are targeted at business leaders. In business, three major factors make up the Bermuda Triangle of fraud where dollars and esteem are lost.

Opportunity – Many companies have ineffective internal controls, or no controls at all, leaving the door open to fraud. Consider what Tyco has done to rebound from its troubles. It hired a new CEO and more than 60 new senior executives, and replaced its entire board of directors. The new directors (all of whom have strong backgrounds in operations as well as in finance) have meticulously scrubbed all of the books, and have made it very clear who has authority over which transactions. The new board has three executives reporting directly to it to provide oversight of the day-to-day management of the company, and it's creating stronger boundaries between finance and operations management below the senior executive level.

Incentives and Pressures – Fraud and corruption aren't committed by faceless organizations. They are crimes committed by individuals to fatten their own pocketbooks or to please their bosses and Wall Street. Too often, a company code of ethics is just words. Business leaders must lead with their own ethical actions, and show their employees that the organization exists to serve more than Wall Street or themselves. Rather, it serves customers, shareholders, fellow employees, the community, and the environment. Employees shouldn't be pressured to choose between integrity and profits.

Complacency – The sad truth is that millions of businesspeople are complicit in this morphing of capitalism, through actions or inactions. Through complacency, we have given legitimacy to this system gone amuck.

Speaking out against wrongdoing takes guts and moral courage. As Martin Luther King, Jr., said, "A time comes when silence is betrayal . . . . Some of us who have already begun to break the silence of the night have found that the calling to speak is often a vocation of agony, but we must speak."

We must summon up the strength to blow the whistles and end our silence. The American business community is in a crisis, and we absolutely must stop tolerating egregious, despicable behavior or we, too, will become like the old man who was drowned by his greed.