No More Scandals, Please (Editorial)

Enron. Arthur Andersen. Tyco International. ImClone Systems. Even Martha Stewart.

There seems to be no end to the financial scandals that have sent skittish investors reeling.

The latest is WorldCom Inc., the nation’s second-largest long-distance telecommunications company, which admitted improper accounting by sweeping $3.8 billion in ordinary expenses off its profit-and-loss statement by counting them as capital expenditures. Those are deducted from revenue over a longer period, not immediately.

The company, which is based in Clinton, Miss., had reported profits of $1.5 billion for 2001 and $130 million for this year’s first quarter. WorldCom — some are already labeling it “WorldCon” — must restate its financial results for the past five quarters. The earnings restatement is expected to be the largest in history, which is fitting since this may be one of the biggest corporate bookkeeping frauds ever. It already has analysts predicting the demise of a firm with 80,000 employees.

You can do the math. But apparently Arthur Andersen cannot. That company, already convicted of obstructing justice in the Enron case, when informed of the WorldCom accounting transfers said its own audit “could not be relied upon.”

The most secure jobs in the country these days may those of the Justice Department’s criminal investigations.

All the suspect or fraudulent accounting, the executives who seem to live on greed, the poor management and dumb decisions have certainly fed the general mistrust many Americans already had about the corporate world.

As the list of companies with accounting scandals grows, we cannot help wondering who’s next and whether all investors are, in some way, paying the price for a business culture that is ever more focused on quarterly results than on long-term financial health.

Pennzoil Folks Are Friendly

How many companies wish their receptionist or staff would get a clue when it comes to office guests? We’re guessing most firms would like to offer a friendlier first impression.

Go ahead and concede first place. We were visiting recently at the Bentonville offices of Pennzoil, where more than a dozen employees took time to shake hands, offer coffee and exchange names.

And we weren’t even wearing a suit.

No wonder this company dominates its market. Pennzoil employees sell more than oil. They sell themselves, and their corporate culture.