Looks like Anderson is going down ...

[Owen Byrne]

Here's a quote from a book I'm reading:
"During the past two decades, executives have also learned how to generate
earnings by financial transactions. Occasionally, executives have found it
easier to generate earnings through creative financial transactions than
through developing innovative products and efficient production processes.
The transactions involve creative rearrangement of ownership claims through
mergers and acquisitions, divestures and spin-offs, leveraged buy-outs and
sale-leaseback arrangements. They also include creative financing, use of
facilities financed by tax-free municipal borrowing, well-structured leasing
activities, discounted debt repurchases, debt swaps, and debt defeasance."

Relevance Lost: The Rise and Fall of Management Accounting,H.Thomas Johnson
& Robert S. Kaplan, Harvard Business School, 1987.

Anybody with a smattering of accounting knowledge would know that the
accountants (professional societies, not the firms) have been complaining
about the inadvisability of having auditors doing other business with their
clients since the eighties. The trend over the same period has been heavy
corporate lobbying of governments leading to progressively looser
regulation, and progressively larger accounting scandals.

The chairman of the SEC, because of a wave of accounting scandals, tried to
regulate auditors - specifically to prevent the kind of abuse that Enron
typifies. He withdrew the regulations after heavy pressure from both houses
of Congress.

http://www.essential.org/monitor/mm2002/02jan-feb/jan-feb02interviewcoffee.h
tml

http://money.cnn.com/2002/01/11/companies/acct_scandals/

Its interesting that the argument of the book I quoted was that large
American corporations, due to the need to report positive short-term
results, have had to resort to the creative financial management as
described above, leading to a long-term decline in competitiveness:

"When senior management no longer receives accurate information about the
efficiency and effectiveness of internal operations, the organization
becomes vulnerable to competition from smaller and more focussed
organizations. Smaller organizations that may be conducting a higher
fraction of transactions in the marketplace than within the hierarchy - for
example , small steel mills that purchase already processed raw materials,
such as scrap, rather than produce steel starting from raw materials -
become more efficient than giant enterprises..."

(All quotes are from the chapter "The Obsolescence of Accounting Systems").

The mention of the steel industry highlights for me that the fact that the
authors did not anticipate the extent to which those same large American
corporations, rather than dealing with their long-term decline in
competitiveness, have been successful in lobbying governments to protect
them from competition and reduce regulations to allow ever greater use of
creative transactions to oversell the economic health of their companies,
leading to further long-term decline.

And like you say everyone has forgotten about Enron. Now they're talking
about WorldCom and Global Crossing.
Owen

----- Original Message -----
From: "Adam L. Beberg" <beberg@mithral.com>
To: "Max Dunn" <maxdunn@siliconpublishing.com>
Cc: "'FoRK'" <fork@xent.com>
Sent: Sunday, March 17, 2002 12:30 AM
Subject: RE: Looks like Anderson is going down ...


> On Sat, 16 Mar 2002, Max Dunn wrote:
>
> > > Now why, exactly, is the destruction of Anderson not going
> > > to be something that other Accounting firms and accountants
> > > pay attention to in the future?
> >
> > Why not? I bet they will pay attention. This whole spectacle will be a
> > good thing in the long run.
>
> The faster Enron and Anderson are burried the faster everyone else can get
> back to business as usual.
>
> The public has a very short attention span. The recession, the terrorists,
> accounting scams, and the currupt government running it all are old news,
> and noone is paying attention anymore.
>
> You're like, soooooo living in last year, like totally.
>
> Get with it, it's all about Oscars, Iraq, boy-loving priests,
> now-multi-millionare terrorist victoms, and drinking yourself stupid with
> green beer.
>
> - Adam L. "Duncan" Beberg
>   http://www.mithral.com/~beberg/
>   beberg@mithral.com
>
>
>
> http://xent.com/mailman/listinfo/fork
>