The cult of the CEO (as some business gurus now call it) promoted a celebration of testosterone and greed that has coarsened the culture and damaged economic life in severe ways. The adoration of corporate executives--those with a tough-guy disregard for their employees and social norms--seems to be receding now, along with stock prices and disappearing profits, but it does resemble a utopian cult, in which the followers obsessively worship a few strong guys said to possess superhuman qualities. The major media were taken in, but so were many sophisticates. The New Yorker published many admiring character studies of these new titans and even resurrected J.P. Morgan as a worthy icon for our time. Now that icons are falling all around, it seems daft that so many respectable, presumably rational citizens fell under the spell. The establishment's first line of defense--"only a few bad apples"--has been completely crumpled by events. Leaders from finance are now solemnly promising "business ethics" reforms, anxious to restore "trust" in a system that runs on other people's money.

William Lerach, the plaintiffs' lawyer reviled and feared by corporate executives, brings a sharp-edged and refreshingly anti-establishment voice to the emerging debate over how to reform corporate governance. Based in San Diego, Lerach is a fiercely opportunistic advocate for victimized shareholders and has brought hundreds of lawsuits against corporations large and small, usually for fraud. This is clearly his moment in history. Lerach's list of current defendants starts with Enron, WorldCom, Global Crossing, AT&T, Lucent and Qwest, along with many other firms where investors were duped and burned. His law firm, Milberg Weiss Bershad Hynes & Lerach, dominates the field and has an active docket of some 2,000 cases, roughly half of which involve stock-market abuses.

More significant, Milberg Weiss is opening up promising new territory for class-action litigation that could make Lerach and other trial lawyers into an important force for corporate reform--lawsuits that curb the grand larceny but also change operating routines and power structures within companies. The law firm has already won a string of minor victories in which corporations, in addition to paying cash settlements, were compelled to adopt various internal reforms--some of the same governance reforms that shareholder advocates have been pushing for years in proxy fights, usually without success.

In the present climate, Lerach and partners propose to up the ante. They are aggressively recruiting major pension funds and labor unions as plaintiffs with the promise that shareholder litigation can produce major reforms in corporate behavior--far beyond anything Congress is likely to enact or that the "self-regulating" measures proposed by financial leaders would accomplish. Their venture is untested, but has a potential to generate real leverage over the titans and a measure of power for victimized groups like investors, workers and communities.

As Lerach discusses the current scandals, one begins to grasp why he evokes fear and loathing in the executive class. He has a simple explanation for what generated the greedy excesses--the bloated CEO salaries and stock options, the insider loans and fraudulent bookkeeping to pump up stock prices. "Penis envy," he said. "I don't want to use the term, but that's almost what it is. It's like, 'Gee, when the CEO of that company over there is making $20 million, I ought to make $24 million.' Then the other guy says, 'Well, if he makes $24 million, then I've got to make $30 million.'"

Corporate moguls, Lerach explained, have a character flaw that is often fatal. "The CEO ultimately gets brought down by the very personality characteristics that made him successful in the first place," he said. "How did these guys get to the point where they control a big public company? It's not because they take no for an answer. Their whole life has been fighting and overcoming people who say no, you can't do it, don't do it, it's illegal. These guys say, 'To hell with you, we're doing it, we're getting it done, nobody can stop me.'" And, when they get to the top, nobody dares stop them.

What these animal spirits need is "adult supervision," Lerach observed. He envisions a system of discipline imposed by independent overseers, inside and outside the corporation, with the power to say no and make it stick. But Lerach doesn't expect much help in this from either reform legislation pending in Congress or from the Securities and Exchange Commission, which he has observed over the years steadily weakening the original intent of the securities laws enacted in the 1930s. "Since I view myself as a traditional liberal, I ought to be in favor of enhanced government regulation, but I no longer believe in that," he said. "Because the regulated industries capture the regulators all the time. I don't care what rules you write. With an army of highly paid lobbyists permanently in Washington, they're too powerful, too permanent."

Obviously, he said, the most effective reform is sending executives to prison, though Lerach doubts this will happen either. Prosecutors are either too timid or outgunned by the platoons of pricey defense lawyers. "There is no criminal accountability for white-collar crime at that level; there simply isn't any," Lerach said. "The head of J.P. Morgan Chase does not give a crap if he gets caught in Enron and he has to use the Morgan shareholders' money to settle $2 billion in civil claims. He's still going to have his four homes; he's still going have his $300 million, his yacht, his life. You put him in jail for three years--not that I'm trying to pick on [CEO William] Harrison. But if he knew he had a real credible threat of going to jail for three years, he would behave differently."

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