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Tuesday, 26 November, 2002, 11:02 GMT
US lessons in ethics for CBI

The chief executive of the US computer giant Hewlett-Packard has told British company bosses that they must help restore faith in business.



Watch the CBI conference live online

Carly Fiorina, who has just completed the biggest computer firm merger in history, said that, in the wake of the Enron collapse, company directors had to lead by example.

Referring to the spate of business scandals that began with Enron she said: "It is greed pure and simple."

She told the CBI's annual conference that there had been abuses of trust and power, and checks and balances had failed.

"A board member's job is not to applaud management, a board member's job is to question."

There will still be risks

She said that because share-ownership in the US was now so widespread, with more than 60% of people owning stocks, the effects of the Enron, WorldCom and other company scandals had been enormous.

"Corporate wrong-doing is being felt not just at the boardroom table but at the kitchen table as well."

She added: "No one of us alone can restore faith in the market, it's up to all of us."

But she warned: "There is no way to properly safeguard every business and every investor against risk."

Defending high pay

Earlier, on BBC Two's Newsnight programme, Ms Fiorina said it was "appropriate" that new, tougher legislation was passed following the series of corporate scandals that rocked the United States.

She said she was "astounded" by the revelations of wrong-doing as they emerged in the past year at a series of prominent US companies.

But she defended the high pay of US company bosses, saying it was justified as long as it was linked to performance.

The HP boss said she was among the "lower paid" of US bosses, on a basic salary of $1m a year.

Paying failed executives

At the CBI conference Sir Nigel Rudd, the chairman of Kidde, warned that one of the threats to the reputation of business was the issue of directors' pay.

This was a particular problem when executives were sacked for failure.

"The headlines are that these people have taken a huge amount of money out of the company in spite of failure."

But he said the problem for boards was that they would have signed a legally binding contract when they took on the executive and if they failed to pay up they would be taken to court.

"There has to be greater transparency so that when somebody joins a company we need to spell out, almost as a pre-nuptial agreement, what happens in three or four years' time if it goes wrong."

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Carly Fiorina, HP chief
"We are returning now to a scenario where balance sheets and integrity matter."

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