"Enron? What Enron?"

[brian_igo]

Looking for the accounting reforms promised in the wake of the Enron meltdown last winter? Keep looking, and expand your search to milk cartons.

The New York Times reports that proposals for reform are all but dead in Congress. Guess who played Kervorkian? Andersen might have some problems writing campaign checks these days, but that hasn't stopped the remaining big audit and consulting firms from lobbying like a mother.

Phil Graham, that infamous defender of the little guy, said "The feeding frezny is over...No one who sits on an audit committee will be the same after Enron."

Really? Has Enron finally gotten the point across? Wasn't Sunbeam, Waste Management, and the Cedant fiascos sufficiently bad to get the attention of audit committees before Enron? Didn't the need for honesty and integrity in the boardroom become rather obvious after the Savings and Loan debacle ten years ago?

If you haven't been keeping score there has been a tidy progression in the cost of these cases of fraud. Every meltdown has been bigger than the last, every case dragged into the disinfectant of sunlight more outrageous. With Enron, there was a moment of hope that this was finally big enough to bring adult supervision back to the ethics of business. That, it now appears, was wrong.

The collapse of Enron took down an entire sector of the market. Two companies under suspicion for accounting irregularities now are conglomerates GE and Tyco. If it is discovered they were cooking the books, how do you limit the damage to just one sector?

Phil Graham had better be right.


Brian

[poseidon]

Brian,

Figuring that a lot of the downside of the market recently is due to concerns over accounting & audit measures, I think Phil Graham is right.

Each time I check out why the stocks have been battered so badly for the day, this is the main question... but of course I only check my stocks on Yahoo Finance...

[kurt_messick]

The markets do need confidence restored. I'd like it to be a real confidence, and not just a cover-up confidence for the sake of getting a rise out of the markets as elections draw near.

[brian_igo]

This morning on the drive home, NPR had a story about how two major pension funds aren't waiting for Washington. The State Treasurers of New York and North Carolina are also the sole administrators of their state retirement and pension funds. Combined they have about $180 billion invested, and these two gentlemen are applying $180 bil worth of muscle on reforming ethics and accounting standards in the companies they invest in.

They are putting pressure on the boards of companies their pension funds invest in to act as shareholder advocates instead of cronies for whomever the CEO is. Pressure is also landing on the audit committees to behave as trustees for the corporation.

Makes sense, doesn't it? Here is the free market in action, the power of capitalism at work. Well, guess who is against it? That's right, the goddamn accounting industry. Check this: Their spin is, if the trend spreads there will be fifty state standards for accounting and business, and accounting should only be subject to a single national standard. How pension fund managers looking out for the best interests of their investors and voting with their wallets becomes "fifty different state standards" escapes me, but I don't lie well enough to work in PR.

Something to keep in mind: The S&L fiasco cost taxpayers $165 billion dollars, which at the time was an unheard of sum. Enron alone wiped out over $140 billion in shareholder equity. Folks, you can only shoot something with a Howitzer so many times before it sustains some real damage. If the largely honest and honorable business leaders of America do not stand up against this manipulation of the public trust by a few, they are digging their own graves.


Brian

[erik_kosberg]

FWIW, I think that Enron is only the tip of the iceberg. You ain’t seen nuthin yet. IMHO, when the festering sore known as J.P. Morgan Chase implodes, Graham’s reassurances will seem like whistling past the graveyard.