(FORTUNE Magazine) – The food was good. The weather was heavenly. But the Greenbrier resort in West Virginia was not an especially joyous place in early October as 68 chief executives converged for a meeting of the super-exclusive Business Council. Alone for once, shielded from the media, CEOs normally relish the opportunity to mingle with their peers and bask in one another's reflected glory. But this was the year of the disgraced CEO, and as a panel on corporate governance got underway, the participants spoke reservedly. There were the predictable comments about a few bad apples. There was frustration that everyone was being punished for the sins of a few. There was agreement that most chief executives were not criminals.

But then the discussion took an unexpected turn, according to two people present. All CEOs, declared the chief of a big European manufacturer, were in some sense responsible. It wasn't just a few bad seeds who were taking unjustifiable salaries or pushing accounting rules to their limits, he said. Everyone needed to take a look in the mirror. With that, the head of a financial services giant took the floor and issued an appeal: CEOs needed to break their public silence and forcefully condemn the business practices that had led to the scandals. Otherwise, their image as crooks would linger.

If the discussion veered from self-exoneration to something resembling a Maoist self-criticism session, take it as a measure of CEOs' confusion--confusion about how to respond to their sudden transformation from visionary giants to moral midgets. For there was a time, believe it or not, when CEOs weren't regarded as a threat to children. Bookstores brimmed with titles like How to Become CEO, How to Act Like a CEO, The Mind of the CEO, and, oh, yes, CEO Logic: How to Think and Act Like a Chief Executive. We got ourselves a whole White House full of CEOs. And what fun it was to be one! As Jack Welch observed in his autobiography, "Being a CEO is the nuts!"

Now many feel they'd be nuts to take the job. A recent Burson-Marsteller poll found that the proportion of senior executives answering "No" to the question "Would you want to be a CEO today?" doubled in just one year, from 26% to 54%. While CEOs have become fodder for editorial cartoonists, the TV network Pax has launched a new series, Just Cause, in which a morally supercharged paralegal goes around whup-assing Ken Lay types. (Tag line: "Cleaning up America ... one crooked CEO at a time.") It's demoralizing enough that some real-life CEOs have started sounding like Stuart Smalley. "I'm proud to be a CEO," one FORTUNE 1,000 chief affirmed to himself (and me) a few months back. "It's an honor." And doggone it, people like me.

The embattled CEO is the focus of this special issue, and the scandal fallout is only part of the story. Chief executives simultaneously face a reeling stock market, a go-nowhere economy, and, as chronicled in several of the stories that follow, their own very personal battles. Yet they're all working under a heightened scrutiny born of one thing: lack of trust.

How did CEOs get themselves into this fix? And why are they having such difficulty getting out of it? The answer to both questions can be traced to two words: shareholder value. Today the CEO talking solemnly about shareholder value has become such a cultural fixture that, like the pro athlete who just wants to give 110%, it's hard to imagine that things weren't always thus. But they weren't. A generation ago the leading CEOs were public-minded statesmen who were comfortable addressing big questions about business's role in society, government, the solar system, and so forth. Shareholders were only one concern--and not the central one at that. General Electric's Reginald Jones, for instance, spoke in terms that today's CEOs wouldn't touch with a 10,000-foot pole: "Too many managers feel under pressure to concentrate on the short term in order to satisfy the financial community and the owners of the enterprise--the stockholders," he told U.S. News & World Report shortly after retiring in 1981. "Boards of directors have to understand that they must shelter management from these pressures." They should do it, Jones added, "in the interest of the nation."

The nation, no less!

The week that U.S. News interview appeared, another article was sitting on the newsstands. It was penned by accounting professor Alfred Rappaport in the Harvard Business Review, and it popularized the term "shareholder value."

The first to pick up on it were corporate raiders like T. Boone Pickens, who wielded the phrase as an intellectual cudgel in their attacks on entrenched managers. Terrorized CEOs eventually found ways to defeat the raiders. But by then boards of directors had begun acting like raiders themselves, ousting CEOs who failed to deliver--you guessed it--shareholder value. CEOs began to catch on: If they wanted to keep their jobs, they had better start talking about shareholder value too.

While their embrace of their persecutors' religion was at first grudging, CEOs soon found the enemy faith had a major upside. One of its main tenets was to "align" managers' interests with shareholders' interests through the use of stock options. A noble idea in theory. Yet in a twist the theoreticians hadn't foreseen, CEOs began taking options grants worth not thousands or millions but tens and even hundreds of millions. CEOs' interests, it seemed, just needed more and more aligning.

Soon some of the biggest shareholder-value tub-thumpers were taking the lead in gaming the system. Instead of treating the stock price as the natural byproduct of building a successful company, they began pursuing it as an end in itself, boosting their own net worth but often crippling the company's long-term prospects in the process. This narrow conception of shareholder value no longer had much to do with valuing shareholders, and in all too many cases familiar today--Global Crossing, Enron, WorldCom, Sunbeam--it turned them into bag holders.

Having co-opted the rhetoric of shareholder value and perverted it to their own ends, CEOs as a class now find themselves friendless. During the downsizing debates of the early and mid-1990s, they had been criticized for giving shareholders too privileged a position in relation to other groups, notably employees and communities. Now the very people in whose name CEOs had acted--shareholders--feel betrayed as well.

Which brings us to the paralysis part. Now seems the time for corporate leaders to step forward and repair public trust through an open airing of the issues: What are the internal conflicts and pressures that contributed to the system's failure? How might they be fixed? Yet with a few courageous exceptions--Goldman Sachs's Hank Paulson, Intel's Andy Grove, Warren Buffett--the overwhelming response has been ... silence. "Where are the business leaders?" asks Warren Bennis, the dean of leadership experts. "Why aren't they speaking out?"

In part, CEOs are prisoners of their own rhetoric. Having chanted the shareholder-value mantra for so long, they seem to have forgotten how to talk about anything else. Not that anyone's suggesting a return to the days when CEOs could blithely ignore their stockholders. But it's gotten to the point where anyone who dares set aside parochial interests to address, say, the public interest risks mockery as a chump or a hypocrite. "CEOs complain to me, 'We've lost all credibility. We've lost all trust,' " recounts James O'Toole, a leadership professor at the University of Southern California, "So I ask, 'What are you going to do about it?' And they don't answer. Maybe they just don't know."

Even a collective organization like the Business Roundtable, which doesn't have to worry about where it stands at the closing bell, has failed the test of public leadership. During this year's debates over stock options and corporate governance, it chose to work behind the scenes--and then mostly to water down reforms.

The result, Yale School of Management professor Jeffrey Sonnenfeld has written, is that "the American CEO community has become largely a spectator group as its reputation and its destiny are debated by others."

Yes, they've lost control of their reputation. The trust is gone. But their destiny? That will be a function of something else: power.

The assumption thus far has been that CEOs' clout will shrink to match their stature: The fall of the "imperial CEO" has been declared everywhere from the New York Times to the Green Bay Press-Gazette. This magazine, too, ran a cover story entitled "The King Is Dead," announcing that "the imperial CEO has had his day" and quoted Paul O'Neill as saying, "The imperial CEO is doomed." The difference, though, is that this story ran in January 1993.

Then, as now, shareholders were in revolt; CEOs were losing their heads; the media were in a lather over executive pay; and Congress was considering curbs on corporate excess. Yet as we know now, the imperial CEO was not only alive and well but very much on the upslope of his career.

What to make of this? One interpretation is that FORTUNE had it all wrong and that nothing ever changes. But in fact a lot did change a decade ago: CEOs lost the job security they had long enjoyed and had to start paying ritual obeisance to the shareholder.

Here's a more likely interpretation: The more things change, the more creative CEOs get at turning circumstances to their advantage. In other words, they've got the power. It's a problem foreseen as far back as 1932, when Adolph Berle and Gardiner Means observed that corporate ownership had become widely diffused among scattered shareholders. Shareholders didn't come to the office every day. Neither did board members. That left the CEO with a chokehold on information and, therefore, a position as the ultimate advantaged insider.

So is it possible the imperial CEO will survive a second round of eulogies?

Those who answer "no" point out, rightly, that the current backlash dwarfs anything that has come before it. In 1992 no CEOs were paraded around in handcuffs. The Senate was not passing tough new corporate governance rules 97 to 0. And no one had yet thought of paying $15,000 for a poodle-shaped umbrella stand. (That awaited Dennis Kozlowski, God bless him.) Perhaps most crucially, the stock market soon continued on its merry way north.

But let's consider the forces arrayed against the imperial boss. Rules, while important, are unlikely to do the trick all by themselves. In a recent study of FORTUNE's list of Most Admired Companies, Yale's Sonnenfeld found that when it came to the standard measures of good governance--the independence, attendance, and financial acumen of directors--the least admired companies stacked up just as well as the most admired. (Enron's board had only two insiders, for instance, while that of one highly admired company was packed with relatives and associates of its CEO, Warren Buffett.) If quantity of rules ensured quality of behavior, Sonnenfeld might have added, GAAP would be the most airtight accounting system in the world.

Public outrage isn't likely to topple the imperial CEO either. When polls show that just 16% of Americans trust business executives, you'd think an enraged citizenry would be mobilizing for change. Yet not too much happened back in 1996, when the figure stood at 17%. (Even during the height of the boom, the number never exceeded 25%.) And the executive-pay flap of 1991-92, when everyone from 60 Minutes to Time to Nightline was on the attack, suggests that Americans have trouble converting disgust into action: CEO pay has shot up another fourfold since. "People say, 'I'm mad. I'm not going to take it anymore,'" notes the executive-compensation critic Graef Crystal. "But they'll take it."

The thinkers I canvassed were thus uniformly skeptical about the incredible shrinking CEO. As Good to Great author Jim Collins put it, "When you have weak corrective mechanisms and you have Caesar, Caesar wins."

So is there any real possibility that CEOs will change their act? Many commentators have concluded that the only hope lies in a fundamental change in values. But before we go recruiting CEOs from divinity schools, maybe we could simply rethink what kind of leadership we value.

Over the past decade we've inflated the myth of the savior CEO, the chest-beating action figure who could single-handedly save or sink billion-dollar organizations. The notion was mostly a crock--in truth, a company's fate depends on everything from market trends to an organization's history to pure luck. But neither are CEOs irrelevant. So what might the post-heroic CEO look like? Not a return to the statesmen of old who, for all their fine rhetoric, often forgot they were running actual companies. Rather, picture a humbler sort dedicated to creating great companies, not Everest-like stock charts. In this issue, you'll meet some chief executives who are trying to do just that--and others who are straining to just hold on. In the former category, there's a gang of refreshingly dutiful CEOs that senior writer Patricia Sellers calls "The New Breed." In the latter, there is Bill Ford. Betsy Morris assesses his efforts to shore up the family car business in "Can Ford Save Ford?" Scattered throughout the issue are chief executives talking in their own voices about everything from their first day on the job to the time they spoke too candidly.

In crafting an agenda for CEOs, however, more candor would be a good place to start. For their own sake, it's time to break radio silence and declare their positions on what practices are proper and how the improper ones should be fixed. "It would take only a dozen major CEOs to give the business community a good chance of rebuilding its reputation," says Jeffrey Garten, dean of the Yale School of Management and author of The Politics of Fortune: A New Agenda for Business Leaders. Yet the onus shouldn't rest on CEOs alone. Investors, boards, and the media must learn to see them as something other than quarterly-earnings machines. Only by expecting less of CEOs in that sense can we realistically expect more of them in the other.

If we ignore these lessons, the imperial CEO will eventually return to wreak an entirely new kind of havoc. If we heed them, well, just imagine an episode of Just Cause in which the CEO appoints a model board, keeps his hand out of the options jar, goes bargain-hunting for umbrella stands, and never, ever takes the words "shareholder value" in vain.

Wouldn't that be the nuts?

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