Shareholder
Kolb+Co.
The reputations of corporate executives, investment brokers and particularly accountants have been tarnished in recent months. The scandals of corporate America have caused all of us to reflect on the ethics and practices of the country’s business leaders, as well as those in our own corporate backyards. We are more aware — and skeptical. No wonder.
Unfortunately, the actions of a few have had an impact on all of our reputations. The trust we place in our advisers and business leaders has been challenged. Rightfully so.
It’s about time that we stand up and have those involved in unethical practices pay the price. It’s too damaging to simply look the other way. We can’t condone less than ethical behavior without taking a hit on our own reputations. For many years, the accounting profession was globally considered to have the highest ethical reputation. My profession has taken a hit — a big one — and it will take years for the profession to fully recover.
We all need to play a role in cleaning up our corporate landscape. I always follow what I call the "other golden rule": "If I wouldn’t tell my mother what I’m about to do, I won’t do it." I don’t mean to make light of a serious issue. But it doesn’t have to be complicated. It’s common sense. Think what would happen if everyone followed this rule. We all must be ethical in everything we do.
Let’s start with auditors. It’s not the auditor’s responsibility to search for fraud. It is, however, our responsibility to ask probing questions to evaluate management’s integrity and the quality of the financial information management has prepared, and then report on that information. Corporate management must properly disclose all of its business dealings while protecting confidential information. And if management proposes accounting methods that would hide the truth or bury it by being intentionally deceptive, the auditors must work with the board of directors to require clean, honest and adequate reporting.
Boards of directors must live up to their fiduciary responsibility of looking out for the shareholders’ best interest — not just that of management; the majority do, but we have far too many examples of failures and lapses of ethical leadership.
As leaders, we must support efforts to eliminate conflicts of interest. Firms that hold themselves out as financial advisers making buy recommendations to their customers and collecting fees should not also be collecting fees from the issuer of the product. Furthermore, investment analysts should be required to clearly indicate their lack of independence when they or their firm have a conflict of interest in analyzing an individual company or industry.
We shouldn’t need laws to protect us from corporate dishonesty and independent oversight committees and auditors to ward off fraud. But the unfortunate examples we have become all too familiar with in recent months are not enough to turn unethical executives into honest leaders. The enactment of the Sarbanes-Oxley Act adds substantial new regulations and penalties to both the CPA firms and the publicly held firms they audit.
Have I lost faith in corporate America? Certainly not. The United States is still the leader in the world and the world economy, not because we say so but because the rest of the world relies on us to be their leader. Is corporate America being punished for misbehaving? Yes, and it deserves to be.
True leadership in any field requires — no, demands — a higher standard of ethics. What we are going through now may be just what is needed to force leaders to look into a mirror, evaluate their performance, get back in line — and back in the good graces of Mom.
Bart Adams is a shareholder of Kolb+Co., a CPA and business advisory firm that provides integrated services and coordinated solutions to closely held businesses and their owners. The group, located in West Allis, has 90 employees and five affiliated advisory firms.
Aug. 30, 2002 Small Business Times, Milwaukee
