George W. Bush, CEO

How would the president hold up under his own rules?

Much was made during the 2000 campaign of the fact that George W. Bush would be the first president to hold an MBA. The implication, cultivated by members of then-Gov. Bush's campaign, was that he would approach the challenges of the presidency much as a CEO tackles the day-to-day tasks of running a company.

But the CEO analogy only goes so far, in part because President Bush is not subject to the same stringent standards that he imposed on business leaders when he signed the Sarbanes-Oxley bill into law on July 30, 2002. The law, aimed at restoring public confidence in the integrity of the business community, requires all CEOs and CFOs of public companies to attest that their financial reports are complete and accurate, and holds chief executives—and their subordinates—criminally liable for any discrepancies. It's a law that's easier to write and sign than to follow, as seen in the example of former HealthSouth CEO Richard Scrushy, the first person to be indicted under it.

When the Scrushy trial began in late January, U.S. District Judge Karon Bowdre told the jury to focus on "whether Mr. Scrushy knowingly participated in the fraud at HealthSouth." Following a nearly four-month-long trial, and three weeks of deliberations, the jury ultimately failed to convict Scrushy on any of the 36 charges brought against him, in part because they were not convinced that he personally sought to deceive investors. Scrushy's defense team consistently blamed the CEO's subordinates, and this may also have swayed the jurors. Quipped one former prosecutor: "This may be the first time that the Sergeant Schultz defense has worked."

But Sarbanes-Oxley, as written, did not necessarily take intent into consideration. The "my subordinates messed up" defense is equally unavailing; Sarbanes-Oxley established that ultimate authority and responsibility resides with the chief executive. Scrushy was acquitted in part becase the court held to a higher threshold of culpability than the law actually demanded.

President Bush would have to hope for a similarly high burden of proof if his own decisions were tested under the Sarbanes-Oxley standards. Did the president deceive Company USA's investors (a.k.a. the American public) when he led the country to war in early 2003? Even if the deception was unintentional, CEO Bush would be required to account for the disparities between the predicted and actual costs of the Iraqi "investment."

In September 2002, White House economic advisor Lawrence Lindsey projected that the "upper bound" of Iraqi war costs would total between 1 percent and 2 percent of U.S. gross domestic product, or somewhere between $100 and $200 billion. But this was just one estimate. White House budget director Mitch Daniels called Lindsey's figures "very high." Several months later, in January 2003, Secretary of Defense Donald Rumsfeld reported that OMB estimates placed the cost of war under $50 billion, and he suggested that some of these costs might be carried by other countries.

Lindsey's "upper bound" has already proved not high enough. The U.S. Government has spent over $200 billion in Iraq, and the Department of Defense is now spending an additional $5 billion every month. According to the Congressional Budget Office, war costs might reach $600 billion by 2010.

A similar pattern emerges with respect to the anticipated personnel requirements of the Iraqi operation. In February 2003, then–Army Chief of Staff General Eric Shinseki projected that it would take "something on the order of several hundred thousand soldiers," operating over a period of several years, in order to bring stability to Iraq. Deputy Secretary of Defense Paul Wolfowitz disputed these figures, publicly declaring the general's estimates "wildly off the mark."

Today, over two years after President Bush declared that major combat operations were over in Iraq, the United States has almost 140,000 troops in Iraq. Many observers believe that is not nearly enough, and most Americans assume that U.S. forces will be in Iraq for at least several more years. Perhaps Gen. Shinseki had it right?

Reasonable observers (though not the framers and signer of Sarbanes-Oxley) might point out that accurate information is central to compliance with any standards of management. The financial projections that business leaders use to convince investors to support a particular initiative are often highly speculative.

The president's defenders might argue that, with regard to the invasion of Iraq, he based his decision on an honest assessment of the available facts (though this case is steadily becoming harder to make). But can the same be said, for example, about the way the White House knowingly lowballed the cost of its Medicare prescription drug benefit?

When George Bush signed Sarbanes-Oxley, he declared, "This law says to every American: there will not be a different ethical standard for corporate America than the standard that applies to everyone else." But America's chief executives are in fact held to very different standards. What remains to be seen is whether the standards are too high for company CEOs, or whether they are too low for the nation's Commander in Chief. Or both.