Day after day, Ivan Boesky worked his 160 phone lines, scooping up stock tips from Wall Street's lofty and lowly. Some of it was legitimate information - but not all. The apparently huge network involved in inside trading has many business-watchers worried that something new and dangerous may be occurring on Wall Street: a widespread loss of ethical values.
``I think there has been a breakdown in the communication of ethics between senior managers and middle-level managers,'' says Perrin Long of Lipper Analytical Services, an observer of the securities industry for the last decade.
As long as there has been stock trading there have been people who cheated. But the sheer magnitude of Mr. Boesky's insider-trading scheme - his ability to get so much private information - has many securities-industry-watchers asking whether this is just the same old game or whether something new is going on.
The Boesky affair and some 30 insider-trading cases brought by the Securities and Exchange Commission in the last year indicate a high level of unethical conduct on Wall Street in recent years, according to those in the financial community and those who monitor it.
``What's going on is not just what has always gone on,'' says Gary Edwards, executive director of the Ethics Resource Center, a nonprofit group in Washington, D.C. ``There has been a weakening of the institutional means of transmitting values and ethics.''
Mr. Edwards points to the explosive growth in the securities industry since deregulation in 1975. In particular, he singles out the expansion of investment banking, which used to be a small, tightknit community of firms that enforced an unwritten set of rules. In the past, he says, there was the expectation that ethical values would be ``caught'' informally by young investment bankers from their hoary-headed mentors.
But there has been less and less opportunity for this orderly, informal process to work today.
Investment banking revenues have shot up from $781 million in 1975 to more than $4.3 billion in 1985 - a 450 percent increase in 10 years. The entire securities industry has rocketed from $5.9 billion in revenues to $38.7 billion (up 556 percent) in the same period.
Such spectacular growth has been managed by a fleet of new investment bankers and managers, often fresh out of business school. Critics say dilution of Wall Street's experience level has meant a dilution in values. Of course, Wall Street's ethics haven't been dumped out the window. The vast majority of the investment community obviously realizes that ethical behavior is in its own best interest.
``I don't think the major investment banks have lost sight of their long-term ethical goals,'' says Samuel L. Hayes III, a professor of investment banking at Harvard Business School.
``But the pace of the activity and the number of people to be managed has increased so much that the result is a diminution of the orderly dissemination of standards that in an earlier era would have filtered down through the ranks.... It is a source of concern - it isn't something to be treated lightly.''
Mr. Hayes notes that in the 1970s an investment banking firm might have had 200 employees; today it may have 6,000 people working for it. Investment bankers involved in mergers and acquisitions, he says, ``are under great pressure to keep finding new revenue sources to feed the monster that's been created.''
There are indications, too, that the degradation of business ethics isn't simply a Wall Street phenomenon, but that Wall Street, as usual, is acting as a kind of barometer - showing where ethics on the corporate level are headed.
Public opinion also shows that trust in big business has dropped significantly in the last decade, says W.Michael Hoffman, director of the Center for Business Ethics at Bentley College in Waltham, Mass.
Dr. Hoffman cites a number of surveys, among them, a New York Times/CBS opinion poll in 1985 which said 55 percent of the public felt big business executives weren't ethical.
``The last 20 years has seen a steady decrease in confidence in big business and business executives - and this wasn't always true,'' Hoffman says. ``Big business has rapidly become, in the public's view, one of the biggest threats to the country's future.''
Ironically, a 1984 survey by the Ethics Resource Center showed that 3 out of 4 of the 1,500 largest United States corporations now have a written code of ethics - the bulk of these codes written between 1974 and 1979.
Indeed, big business has been giving unprecedented attention to ethical standards within companies. Beside codifying ethics, companies often ask employees to sign an affidavit every year stating that they have obeyed company policy. Ethics seminars are more frequent.
Sensing that businesses want new recruits to understand right and wrong better, business schools have boosted ethics education. Business schools increased ethics education by 500 percent between 1975 and '80, Hoffman says.
But with all this attention to ethics, why does public opinion still see big business as prone to corruption?
``You often have an environment that pays more attention to economic success and winning than other values,'' says Kenneth E. Goodpaster, an ethics professor at the Harvard Business School.
``Soul searching has got to go on in the highest levels of the business institution,'' he says. ``What kind of values do we communicate around here? What signals do we send when we promote executives? Do we emphasize the means as well as the ends?''
Still, if ethics are so important, why don't most business schools make ethics courses a requirement instead of an elective? If big business is so eager to institutionalize ethics among employees, why don't more companies have a framework to assess how ethics codes are working?
Edwards says a survey of 100 large companies with the best-developed ethical codes showed that 90 percent of the company presidents were pleased with compliance with the code. But only 1 in 5 of the presidents had any means of monitoring compliance.
As businesses become larger and more decentralized, the long-term corporate trend toward ``management by objective'' (setting high goals for people and expecting them to meet them) is gaining an ever stronger hold in American business. That has created what may become the greatest ethical challenge for US business.
``People are always at the risk of facing goals they can't meet,'' says Edwards. ``Management by objective is a good tool. But with it, there is a greater likelihood that good people, moral people, will do illegal or unethical things to help the company, do their job, help their careers.''