Federal laws and government arrests are only part of the story of America's effort to leave a wave of corporate scandals behind.
Thursday's high-profile arrest of two former financial officers of WorldCom, in fact, coincides with a rush of self-correction efforts by corporations and private-industry groups.
The private-sector trends are significant:
Corporate boards have been accelerating a long-term shift toward having more directors who are considered independent of top management.
Since this spring, companies have been scrambling to improve their financial disclosure to reassure skeptical investors.
At least 19 companies including General Electric this week have already decided to list options on their books as expenses. Options are seen as a temptation to executives to inflate the value of their firm's stock. The accounting change could prod companies to issue fewer options.
Industry groups are moving to ward off future corporate misdeeds. Thursday the board of the New York Stock Exchange was expected to approve a raft of proposals to restore investor trust and confidence in US firms. Moreover, even as Congress continues to weigh legislation to require that stock options be "expensed," the private Financial Accounting Standards Board plans to consider the matter on its own at a meeting Aug. 7.
The changes likely stem from a variety of motives, many of them boiling down to self-preservation. The prospect of jail time, concern with public wrath, and investor punishment in the stock market all have CEOs' attention. Also, many firms may hope that by acting on their own they can avert a continued tide of laws and regulation.
"There is a very significant amount of automatic self regulation, [given] the extent to which the stock market is punishing a company in which there is even a rumor there is a problem in the books," says Murray Weidenbaum, an economist at Washington University in St. Louis.
Some experts cite the corporate efforts and the discipline of the stock market as evidence that the crisis of confidence in business will be largely healed from within.
Others say that new laws have a crucial role to play including the accounting reforms and tougher sentences for executive fraud that President Bush signed this week. The lesson of the current scandals, they say, is that American capitalism works best with vigilant oversight.
Still, the magnitude of the do-it-yourself moves by business may be close to being unique, historically.
"I can't think of a single incident where there was this amount of housecleaning internally," says Mark Blyth, a political scientist at Johns Hopkins University.
Past scandals have generally prompted action by Congress and government regulators. The collapse of the savings and loan industry in the 1980s resulted in the creation of the Resolution Trust Corp., a government agency to take over their assets and pay off depositors.
A wave of corporate bribery in the 1950s and 1960s brought about the Foreign Corrupt Practices Act. It also prodded companies to create internal codes of ethics that, it appears, are only as good as the emphasis placed on them by managers.
Indeed, some free-market enthusiasts say do-it-yourself actions may not be sufficient to correct abuses without new law and regulation. "You can't assume the market will correct by itself," says Mr. Weidenbaum, a former top adviser to President Reagan:
Some critics, too, say the new rules aren't tough enough.
"So much of it is an effort by business and government to look like they are doing something to improve the situation," says Les Greenberg, chairman of the Committee of Concerned Shareholders. "As time passes, it will go back to business as usual."
The shareholder activist, a lawyer in Culver City, Calif., wants the rules for corporate proxies changed so that "truly independent" outsiders have a change to be elected directors in competition with those candidates selected by management and fellow directors. At the moment, an outside director-candidate faces expenses as high as $250,000 to get his or her name on the ballot.
At present, he argues, directors are too beholden to management to do their job properly.
Jeffrey Sonnenfeld, associate dean of Yale School of Management, has examined companies ranked by Fortune magazine as "most admired" and "least admired," in terms of corporate governance. He finds little difference between the two. Both groups had boards with similar compositions of independent directors, size of board, personal wealth invested in the company, and so on.
Even Enron had a superb board in terms of the experience and background of its directors. Thus, "mechanistic" reforms in boards, though desirable, do not automatically improve corporate behavior, he says.
Given the limited power of boards, chief executive officers remain pivotal to the goal of correction from within.
CEOs of major corporations are "disappointingly silent" on the scandals, Mr. Sonnenfeld says.
The risk of silence, experts say, is a backlash in public opinion that could affect the climate for regulation and consumer confidence.
A survey published Wednesday by the Financial Times, found that the top executives and directors in the top 25 companies to go bankrupt in the past 18 months amassed a total fortune of $3.3 billion, even as hundreds of billions of shareholder value and nearly 100,000 jobs were wiped out.
The climate of public opinion regarding such news depends somewhat on whether the current wave of reforms restore trust and help turn around one of the worst bear markets in decades.
The nation's major stock exchanges are clearly concerned. The New York Stock Exchange rules proposed Wednesday were expected to aim at increasing the role and authority of independent directors. They would, among other things, tighten the definition of what "independent" means. Nasdaq ones announced last week are mostly similar.