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Volume 4,
Issue 2 |
February, 2002 |
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ã 2002 Hopkins and Company, LLC Note re: links---certain
hyperlinks assume that you are registered as a subscriber to the site. If you
are not a subscriber to certain sites, the links will fail. If you register,
the links should work. Also, certain hyperlinks expire and may not be
available when you try to go to the site. Had Enough Chum?Almost every day over the
past month, there’s been another tidbit in the news about Enron, now
called “The Crooked E,” or Andersen, the paperless auditor. Like bits
of fish thrown into the ocean to attract the attention of prized game fish,
there’s been a feeding frenzy in the business press over the behavior of
executives. We’ve tried to glean a fresh perspective on the Enron situation
from these stories to explore how we might learn from the challenges faced by
others. Along with many other observers, we’ve wondered if the relationship
between Enron and Andersen was too close (too chummy?) to ensure the
auditor’s independence. We’ve looked at Andersen’s approach to client
satisfaction to examine that issue. We read the letter that Enron VP Sherron
Walter sent to CEO Ken Lay, and have some thoughts on why her
voice may not have come through loud and clear. Who helps whom when the
company lawyer sends confusing messages about company policy? As you read
this issue, already somewhat sated by all the Enron stories you’ve read, find
some aspect that will hook your attention and reflect on what you might do
differently as a result of your observations of the actions of others. There are a few non-Enron
stories included in this issue, just for a change of pace. One of our
top-rated books in the Reading section tells the story of a business failure:
dot.bomb
by David Kuo, about the rise and fall of Value America and its
CEO Craig Winn. It’s an engaging, well-written book that may lead you
to think about the ways you contribute to the success and failure of your
organization. “It’s All About You” For at least the past
twenty years, experts have bludgeoned service providers about the critical
importance of client satisfaction. No business can succeed without doing a
good job in meeting customer needs. Those providers who meet the most
customer needs at the lowest cost will win business. Among the most important
choices executives make are the decisions to select the customer needs an
organization will meet and to choose not to meet certain customer needs. For
an independent auditor, the most important service provided is to render a
professional opinion as to whether or not management’s financial statements
present the organization’s financial situation fairly, in all material
aspects. Has competition among auditing firms clouded their approach to
appropriate service? We checked out the Andersen website (http://www.arthurandersen.com/website.nsf/content/NorthAmericaAwardsEmerson?OpenDocument)
and read of the company’s pleasure in being recognized by Emerson Research
as being number one in client satisfaction. “Clients expect more from Arthur Andersen
than from any other Big Five firm. Even with the bar set so high, we still
exceed expectations. With Arthur Andersen, you get the experience, responsive
service and industry knowledge you count on — and more.” Investors and
regulators don’t care whether the client is satisfied or not: they want
independent judgment applied in a professional manner. Andersen had it right
in their webpage header: “it’s all about you.” The service public accountants
provide is answering the question: are you who and what you say you are? Has
the blending of consulting services and auditing by the same service provider
led to an unwise inclination toward client satisfaction and away from client
accuracy and compliance? How do you decide which customer needs to meet and which ones to leave for others? Are any of your service providers stretching beyond their areas of core expertise and competence? Are there situations you’re involved in that harbor inherent conflicts of interest? How can you untangle relationships that have become too chummy? When faced with competing interests, who comes first? How will you help to lead systemic changes that may be needed? What Does That Girl Know? One of the emerging heroes
in the Enron saga seems to be VP Sherron Walter. Thanks to the service of
U.S. Representative Billy Tauzin (R-La) we can all read the text of
the letter she sent to Chairman Ken Lay last summer (visit http://energycommerce.house.gov/107/news/layletter.pdf).
After reading the letter many times, and reading profiles in the business
press about Walter, we’ve wondered why her seven page memo was discounted or undervalued
by senior executives. Written just after president Jeffrey Skilling’s
abrupt resignation, was it too detailed to engage executive attention? Do
senior executives have a one page or one paragraph attention span? If
anything, her knowledge of the details should have increased her credibility.
Was her organizational level too low to merit her recognition or respect? Did
her gender lead male executives to ignore her competence and expertise? Was
she not one of the “good ol’ boys,” and therefore not heard or recognized? We
may never know why Enron and its lawyers and accountants failed to pay close
attention to this memo. Reading it leads us to the recognition that Walter
wanted Enron to succeed and do the right thing. How might events have been
different had her voice been heard? What are the
real barriers within your organization to being heard and to hearing others?
How do you know when your messages have been received, and that you have
understood what someone has tried to communicate to you? Are you getting the
information you need to do your job? Are there people in your organization
with the courage to tell the truth, no matter what? Are you one of those
people? Guilt by Association Every business scandal seems to leach liability, like ice cream
melting on a hot day and spreading all over the place, sweet and sticky. As
the Enron financial woes were disclosed, the questions began: where were the
auditors, the regulators, the checks and balances? We want to find someone
specific to blame. The more we read about what happened at and around Enron,
there seems to be plenty of blame to go around. Andersen has admitted it
shred documents. The question is obvious: what were they trying to hide? When
an attorney provides counsel, it’s often with a particular reason, not just
to restate policy. All Andersen attorney Nancy Temple said in her
e-mail was, “It might be useful to consider reminding the engagement team of
our documentation and retention policy. It will be helpful to make sure that
we have complied with the policy. Let me know if you have any questions.”
Now, she’s getting questions: from members of Congress, most of whom have
received campaign funds from Enron, Anderson, or Citigroup, Enron’s
largest creditor. Temple’s other famous e-mail came a few days after the one
quoted above, saying, in part, “I recommend deleting reference to
consultation with the legal group and deleting my name on the memo. … if my
name is mentioned, it increases the chances that I might be a witness, which
I prefer to avoid.” Wouldn’t we all? The images of individuals appearing
before Congress and exercising their Constitutional right to refuse to answer
remind us of past hearings to investigate organized crime or communists in
government. Some of us can begin to associate guilt with the images of
individuals under scrutiny, whether they are proven guilty or not. You can
access the documents mentioned above and written transcripts, as well as
listen to the audio archives of Rep. Tauzin’s subcommittee hearings at http://energycommerce.house.gov/107/hearings/01242002Hearing474/hearing.htm#Released.
How entwined are your fortunes with those of your customers, service providers, partners and advisors? Do you have exposure based on the behavior of people outside your organization? What documents do you keep and what do you toss? Do you follow your organization’s policies about document retention? How would your e-mail messages be perceived if presented in a courtroom or at a Congressional hearing, or on the pages of a newspaper? If your organization makes political contributions, what do you expect to receive for those funds? Payback Time No Wrongdoing? Lost in the Enron news
was the brief story (Associated
Press 1/14/02) that former Sunbeam
CEO Al Dunlap paid $15 million in a settlement to Sunbeam shareholders
just days before a civil trial was to begin. Their claim was that Dunlap and
others mislead investors about sales and earnings. In settling, Dunlap did
not agree to any wrongdoing. Complaints against Dunlap by bondholders and
other investors were also settled, with the terms undisclosed. A pending
civil suit filed by the SEC will likely come to trial next year. Stay
tuned to see if there’s any agreement about wrongdoing. You may recall that
Andersen settled a suit with Sunbeam shareholders last year for $110 million.
Are there times when it’s better to settle and move on, even if you’re convinced you did nothing wrong? What impact would a settlement have on your reputation and that of your organization? What precedent is set by your action to settle? Are you more likely to hide your mistakes or admit that you made them? Rogue Board Member?Competing Road
Shows
Whether or not Hewlett-Packard and Compaq complete their merger, we’ll
always remember the board member who took his own show on the road making a
case against the board-approved decision. While Carly
Fiorina and Mike
Capellas were making
the rounds of investors with their own story, Walter Hewlett, son of co-founder Bill
Hewlett, took his own
70-page briefing book to major institutional investors making a case against
the deal, according to The Wall Street Journal (1/7/02) (http://interactive.wsj.com/archive/retrieve.cgi?id=SB1010358035653170480.djm). Get ready for a very
interesting proxy fight.
How willing are you to voice
your differences when a group decision goes in a direction different from
your wise judgment? Are you more likely to go along with the group and remain
silent, or will you speak out, even if yours is a lone voice?
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Title (Link to Review) |
Author |
Rating |
Review Summary |
Purchase |
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Arnott, Jake |
• |
Multiple narrators describe gay English gangster Harry Starks’ life
of crime, violence and sex. No compelling reason to read this novel. |
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Barth, John |
• |
Postmodern novel that’s hard to follow but frequently clever and
witty. |
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Braselton, Jeanne |
••• |
Finely written first novel of the adventures of a woman of the New South
in her middle years struggle. |
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Another
Planet: A Year in the Life of a Suburban High School |
Burkett, Elinor |
•••• |
Well-written chronology of Burkett’s participant-observation at
Prior Lake H.S. outside Minneapolis from 9/99 through 6/00. Breaks
stereotypes and helps readers think. |
|
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What
the CEO Wants You to Know: How Your Company Really Works |
Charan, Ram |
••• |
Basic training for any employee on the fundamentals of business that
apply from the smallest organization to the largest. Clearly written and
brief. |
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Forester, C.S. |
••• |
Next-to-last book in the Hornblower series. Great relaxation reading
and some lessons on executive demeanor and risk taking. |
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Johnson, Haynes |
••• |
Falling somewhere between journalism and history, Johnson presents
economic prosperity alongside scandal and celebrity obsession. |
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Keywell, Brad |
• |
Annoying book with little helpful information, except for those
immersed in biz dev, or those who want to visit the cages of the animals
who live there. |
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Klein, Maury |
•• |
A historian’s perspective on the stock market crash of 1929, full of
fascinating characters and the context of those interesting times. |
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Accountability
Leadership: How to Strengthen Productivity through Sound Managerial
Leadership |
Kraines, Gerald A. |
• |
It’s the boss’s fault. If you’re in charge, read this, feel a little
guilty, and think twice about adopting Kraines’ system. |
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Kuo, J. David |
•••• |
Entertaining tale of how Craig Winn led Value America toward success
and failure, with Kuo trying to help. |
|
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Tempered
Radicals: How People Use Difference to Inspire Change at Work |
Meyerson, Debra E. |
•• |
Some people who don’t “fit” into organizations take actions that lead
to significant change. Good research and analysis by Stanford professor.
Helps executives think differently about diversity. |
|
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Preston, Robert |
••• |
1997 novel presents accurate science about the real threats of
biological terrorism. Scary, suspenseful, gory. |
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52
McGs.: The Best Obituaries from Legendary New York Times Writer Robert Mc
G. Thomas, Jr. |
Thomas, Jr., Robert Mc G. |
••• |
Well-written, offbeat obits lead reader toward understanding deeper
truths about life and human nature. |
|
|
Whitehead, Colson |
••• |
Well-written novel of parallel lives of railroad worker John Henry
and writer J. Sutter. |
|
ã 2002
Hopkins and Company, LLC. Executive
Times is published monthly by Hopkins and Company, LLC at the
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