NO SENSIBLE PERSON can quarrel with what the president told the Wall Street biggies he addressed last week. Crooks should be forced to disgorge their ill-gotten gains, and should go to jail for extended periods. Enforcement agencies should be given adequate resources. Corporate executives should be held responsible for the accuracy of what they tell shareholders, disclose their compensation in annual reports "prominently and in plain English," and explain why their "compensation package is in the best interest of the company." Board members should be independent and "ask tough questions." Shareholders should speak up. Most important, chief executive officers should create a "moral tone" that ensures the company's top managers behave in accordance with the highest ethical standards.

The quarrel comes not with what the president said, but with what he didn't say. In the game of matching his laundry list of reforms against the inevitably longer list generated by the Daschle-Leahy-Sarbanes-Gephardt crowd, the president inevitably loses, as last week's unanimous vote of Senate Republicans for the Democrats' bill proves. Longer sounds better if you're just compiling a laundry list of items aimed at punishing politically unpopular corporate bad guys. Only if there is a conceptual framework within which specific reforms can be created and defended is there any hope that a sensible corporate governance system will emerge from the congressional legislation factory.

Start with the fact that it is important to distinguish the role of government from that of the private-sector institutions that monitor corporate America. The latter can be relied upon to act when the integrity of the system is threatened, not because these private sector players are a bunch of goodie-two-shoes, but for the more reliable reason that honest markets and accurate profit reporting are in their interest. Just as gamblers won't put their bets down when they know a wheel to be rigged, so investors won't put their money into shares if prices can be manipulated by inflated profit reporting or special treatment of insiders.

Hence we have a stream of quite sensible reforms proposed by the Business Roundtable and the New York Stock Exchange, some going beyond those being pushed by the president. And we have companies scrambling to adopt governance rules and accounting practices that will reassure investors that the game is not rigged against them. No CEO wants to see his company's stock battered by investors who fear that share values will evaporate as profits are restated to eliminate the imaginative counting of revenues (claim them now, before the customer pays or even considers paying) and of costs (capitalize rather than expense every outlay, regardless of the life of the item purchased). Plummeting share prices are dangerous to the careers of chief executives.

But, as the president recognized when he called for higher ethical standards, self-interest cannot be relied upon to produce honest business dealings unless that self-interest includes what Adam Smith called a "desire to be both respected and respectable," and such esteem is seen to flow not from "wealth and greatness" but from "wisdom and virtue." Which may be what Bush had in mind when he said that we need "men and women of character, who know the difference between ambition and destructive greed" to lead our major corporations. And it may be what he had in mind when, immediately after delivering his talk, he returned to Washington to award the Presidential Medal of Freedom--America's highest civilian honor--not to the nation's richest (Intel founder Gordon Moore may have been the one exception), but instead to folks who have enriched our national life with their sharp iconoclasm (Irving Kristol), gentle humor (Bill Cosby), and quiet devotion to family and good causes (Nancy Reagan).

Still, neither self-interested reform nor a new emphasis on business ethics can be relied upon to save capitalism from the capitalists. Immediately after the president's speech the White House was bombarded with calls from CEOs protesting his demand that they disclose their compensation packages in easily accessible terms. I well recall the reaction when, several years ago, I made a similar suggestion at a think-tank-sponsored meeting of top business and government officials. One captain of industry replied that he would not tell his shareholders how much he earns lest he encourage kidnappers (as if they would only become aware of his affluence if he revealed it in his company's annual report).