Executive Times

Volume 4, Issue 2

February, 2002


ã 2002 Hopkins and Company, LLC

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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?



Here are selected updates on stories covered in prior issues of Executive Times:

Ø      Boy, were we wrong when we said that the next president of Argentina would be elected in March! The January 2002 issue of Executive Times was barely in the hands of readers when Adolfo Rodríguez Saá, the interim and unelected president of Argentina, resigned after less than a week in office. We stand by our perspective that his default on the country’s debt will cause his successor(s) and the country problems for a long time to come.

Ø      Readers of Executive Times have noted our high ratings for the books of historian Stephen Ambrose. Stories have been written in recent weeks about flagrant copying of others’ works by Ambrose, beginning with an article by Fred Barnes in The Weekly Standard (1/4/02) (http://www.weeklystandard.com/Content/Public/Articles/000/000/000/738lfddv.asp). We agree with Forbes (1/11/02) (http://www.forbes.com/2002/01/11/0111ambrose.html) that the controversy won’t hurt the sales of his books.

Ø      The January 2001 Executive Times called attention to the Fortune issue on the “100 Best Companies to Work For.” You can read this year’s list to learn what companies are doing today to be well perceived by employees at http://www.fortune.com/lists/bestcompanies/intro.html. Enron didn’t make the 2001list. While we were checking the many lists in Fortune we did see that Enron was #18 in 2000, and #36 in 1999 on the list of Most Admired Companies. Fortune got it right when they named Enron “Most Innovative Company” for six consecutive years. If we only knew the half of it.



For the Kids

Dave Thomas named the first Wendy’s restaurant in 1969 after one of his five children, and according to The New York Times (1/9/02), his ambition was to expand to five, so there would be jobs for each of his children in running them. When the Wendy’s founder died at the beginning of January, the chain had over 6,000 restaurants. Unlike his former boss, Colonel Sanders, Thomas left management to others after his initial success. To the credit of management, they asked him to take a more active role in the company, and his marketing helped propel the company’s rapid growth. His image, mostly in a white, short-sleeved shirt, dominated Wendy’s ads in recent years and represented the longest running ad campaign featuring a company founder. An orphan, Thomas never finished high school, and completed his G.E.D. exam in 1993. In addition to the strong and successful company he built, the Dave Thomas Foundation for Adoption continues to find creative ways to support couples who adopt children. His legacy of hard work and an innovative approach to marketing will be remembered.


Only the Best

The characteristics of quality, luxury and rarity have marked Neiman Marcus for many years, especially through the unusual and pricey items in its catalog. Stanley Marcus, who became synonymous with the store, died in January at age 96. While his father founded the store, Stanley was the one who put it on the map. He started weekly fashion shows during the 1920s to bring people into the store and commented that he had the simplest taste, “I am always satisfied with the best.” It was never beneath him to sell things to people. He is said to have personally sold $10 million in furs to customers. His flair and commitment to personal service will be missed.



 (Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com.  When you order through these links, Hopkins & Company receives a small payment from amazon.com.  Click on the title to read the review or visit our 2002 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html).


Latest Books Read and Reviewed:

Title (Link to Review)



Review Summary


The Long Firm

Arnott, Jake

Multiple narrators describe gay English gangster Harry Starks’ life of crime, violence and sex. No compelling reason to read this novel.

Coming Soon!!!

Barth, John

Postmodern novel that’s hard to follow but frequently clever and witty.

A False Sense of Well Being

Braselton, Jeanne

Finely written first novel of the adventures of a woman of the New South in her middle years struggle.

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.

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.

Lord Hornblower

Forester, C.S.

Next-to-last book in the Hornblower series. Great relaxation reading and some lessons on executive demeanor and risk taking.

The Best of Times: America in the Clinton Years

Johnson, Haynes

Falling somewhere between journalism and history, Johnson presents economic prosperity alongside scandal and celebrity obsession.

Biz Dev 3.0: Changing Business As We Know It

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.

Rainbow’s End: The Crash of 1929

Klein, Maury

A historian’s perspective on the stock market crash of 1929, full of fascinating characters and the context of those interesting times.

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.

dot.bomb: My Days and Nights at an Internet Goliath

Kuo, J. David

Entertaining tale of how Craig Winn led Value America toward success and failure, with Kuo trying to help.

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.

The Cobra Event

Preston, Robert

1997 novel presents accurate science about the real threats of biological terrorism. Scary, suspenseful, gory.

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.

John Henry Days

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 company’s office at 723 North Kenilworth Avenue, Oak Park, Illinois 60302. Subscription rate for first class mail delivery of the print version is $60.00 per year (12 issues). Web version subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 web. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to hopkinsandcompany@att.net, call (708) 466-4650, or fax to (708) 386-8687. For permission to photocopy or e-mail Executive Times, call (708) 466-4650 or e-mail to hopkinsandcompany@att.net. We will send sample copies if requested. The company’s website at http://www.hopkinsandcompany.com/archives.html contains the archives of back issues beginning in the month after the issue date. 

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