Where were the directors of Tyco International when its chairman and CEO, L. Dennis Kozlowski, was buying all those Renoirs and Monets for his Manhattan apartment and pretending to ship them to New Hampshire to avoid paying $1 million in New York sales taxes? He denies the charges, but District Attorney Robert M. Morgenthau appears to have the goods on him, including his fax listing paintings supposedly being shipped to New Hampshire but with the words “wink, wink” in parenthesis.

Where, indeed, were the directors who now belatedly want to know whether Mr. Kozlowski used corporate funds to fill out the $13 million he paid for paintings last year and for the upkeep of the Fifth Avenue apartment he bought two years ago for 18.5 million? Investigators say he paid for some of the art with funds from a corporate loan program set up to help top employees pay taxes on the sale of shares obtained under a restricted stock option program.

And where were the directors when Mr. Kozlowski was using “aggressive accounting” to boost reported profits to keep the stock price climbing? The stock fell from $60 last January to around $16 a share now.

Tyco, one of the 20 most valuable companies in the United States, is just the latest of high-rolling firms that have foundered as creditors and investors have soured on questionable accounting methods and lavish pay and perks for top executives. Among the causes are corporate corruption, greed, and through the late 1990s a go-go optimism that the boom would never end.

Enron’s collapse was the worst, of course, tied in with the disaster at Arthur Andersen, which mixed accounting with a virtual partnership. Investigations have hit Global Crossing, Kmart, Qwest communications International, Schering-Plough, WorldCom and Xerox. And don’t forget Adelphia, which supplies cable television service here in this area (with a recent price hike).

There’s a common pattern. Their boards no longer are the “dummy directors” of an earlier era, who were kept in the dark about corporate shenanigans. Many modern directors are in on the take, paid off with hefty fees, corporate loans, and stock options. And when the boom faltered and the stocks began to tank, many directors and executives bailed out early, leaving the sheep to be sheared when the stocks hit bottom. A nominally independent board member at Tyco got a $10 million finder’s fee for steering business to the company. Adelphia, where the Rigas family used corporate loans to buy up corporate stock for themselves, has a board that is loaded with family members.

Top business leaders have begun to speak out. The chairman and chief executive of Goldman Sachs, Henry M. Paulson Jr., told the National Press Club: “I cannot think of a time when business over all has been held in less repute.” And Samuel J. Palmisano, president and chief executive of IBM, was quoted in The New York Times as warning that growing mistrust of capital markets rivals fears of terrorism and nuclear war as the cause of stock market jitters.

No wonder investors are leery. The New York Stock Exchange is considering new rules for listed firms. Independent directors would have to be in the majority on each board, instead of just three per board as in the present rules. And, to be classed as independent, a director could have no material relationship with the company and may not have worked for the company or have been affiliated with its auditor in the previous five years. The present “cooling-off” period is three years. Independent directors would have to meet regularly by themselves.

The capitalistic system is a form of economic democracy, with boards of directors that should represent shareholders, not just management and not their own fees and perks and insider deals. The new rules would be important but only as a small step. What is missing is trust in management and trust in directors. The system got off the track in the recent bubble. Economic recovery depends on a drastic cultural reform to restore the missing trust.