Business is back (cont.)

By Geoff Colvin, Fortune senior editor-at-large

These companies are acting in their own interest, of course. They're trying to get ahead of a Democratic Congress that surely won't be as business-friendly as Republicans were. Nothing surprising about that. What's significant is twofold.

First, these companies feel confident enough to try setting the agenda on a major public policy issue - no more keeping their heads below the parapet. Second, they will probably succeed in at least shaping the debate. That's partly because they've gone about it wisely, getting the support of the Natural Resources Defense Council, Environmental Defense, and other environmental groups. More deeply, it's because business can now make such a proposal credibly rather than get laughed off the stage.

Another case in point: The Business Roundtable, comprising the CEOs of America's 200 biggest companies, in January joined with AARP and the Service Employees International Union to propose universal national health care. The surprises were many: The biggest of big business partnering with America's most vigorous labor union; free-market-loving CEOs urging a huge new federal program; and again, business acting to set the agenda on one of America's largest issues. In March, Treasury Secretary Henry Paulson convened a group of business leaders to broach an even more surprising question: Had Congress gone too far with the Sarbanes-Oxley regulations imposed in the wake of the financial scandals? A year or so ago, the question would have been heretical.

So how did we get there?

How in the world did business climb out of the deepest hole it had occupied in at least 70 years? As with all large phenomena, many factors converged. It's still easy to remember how business dominated the culture in the late '90s, how companies were money machines, CEOs were demigods, and the Internet fueled the greatest stock market bubble in U.S. history. But then many things happened more or less at once. The markets peaked in early 2000, and within a year the Internet mania seemed like a stupid hoax. A recession began in early 2001. Enron fell apart later that year, the first in a string of unprecedented financial frauds. And then 9/11.

Put them all together, and it was as if the giant klieg light of the public's attention suddenly turned away from business, leaving it abandoned in near darkness, and aimed brightly at Washington, D.C. Here was the new center of action.

Americans needed to be protected from terrorists and corporate con artists, and government would do those jobs, with the public cheering it on. Immediately after 9/11, President Bush's approval rating hit 90%, the highest presidential approval rating Gallup has ever recorded. Among America's young people, trust in government to do the right thing all or most of the time jumped to 60%, from 36%. Most tellingly, Edelman's trust index - which showed business ahead of government by 17 points in early 2001 - reversed within a year, as business lost all of that huge lead and fell behind. In little more than an eye blink, government had become noble and business slimy.

For all that business has done to rehabilitate itself since, a significant factor has been what government has failed to do. It did not become the hero the public wanted. In the fight against terror, polling shows, just over half of Americans think the Iraq war made the U.S. more vulnerable to terrorism, not less so. Washington scandals - the Jack Abramoff lobbying mess, the Mark Foley sex mess - reminded voters that politicians can be every bit as sleazy as any executive.

One episode did more than any other to turn attitudes around. That was Hurricane Katrina, when government at nearly every level looked utterly incompetent while businesses became the heroes. FedEx delivered 440 tons of relief supplies, mostly at no charge. Wal-Mart meteorologists informed managers that Katrina was headed for New Orleans more than 12 hours before the National Weather Service told the public; the company later hauled millions of dollars of supplies into the worst-hit areas days before FEMA showed up. Jefferson Parish sheriff Harry Lee told Fortune, "If the federal government would have responded as quickly as Wal-Mart, we could have saved more lives."

It's clear that individual corporate managers did what they did after Katrina because it was right. At the same time companies knew that by helping others they were helping themselves. "They wanted to demonstrate that they're responsible," says Business Roundtable president John Castellani. "And it's the ultimate in relationship marketing."

Much else was happening - far less dramatically - to rebuild corporate America's reputation. Despite overhyped fears of offshoring, companies were following the fundamental patterns of a growing economy: putting more Americans on payroll. Unemployment has fallen to near-record lows, while corporate profits have risen smartly. The recession was brief and mild, after which the economy picked up--and continues to grow strongly after more than five years of expansion. People eventually got the picture. Gallup polling shows that since 2003 the proportion of people citing the economy as America's No. 1 problem has declined steadily.

Just as important, America's deep thirst for justice after the scandals has been largely satisfied. A day that many cynics doubted would ever come has arrived at last: Enron's Jeffrey Skilling, WorldCom's Bernie Ebbers, and Tyco's Dennis Kozlowski are all in prison, living out their golden years in a gated community of a different kind, as Jay Leno once put it. That, and the passage of time, have quelled the public's cynicism about CEOs' robbing shareholders with impunity.