It seems that Enron’s fall is going to have a more profound effect on American business than many would have thought. Coming as it did just when America was emotionally down and out with 9/11 and the job losses that came with the recession, Enron’s fall is not about to be treated as an ordinary business failure.
There is new focus on corporate governance, specially with the release of an Enron internal inquiry over the weekend. The report said the company inflated its profits by nearly $1 billion and top employees took in millions of dollars they should never have received through complex partnerships that played a major role in the company’s collapse.
The report concluded that the Enron fiasco was caused by "a flawed idea, self-enrichment by employees, inadequately designed controls, poor implementation, inattentive oversight, simple (and not-so-simple) accounting mistakes, and overreaching in a culture that appears to have encouraged pushing the limits.’’ The report said that Arthur Andersen signed off on flawed and improper decisions every step of the way and deserved much of the blame for Enron’s collapse.
Because of Enron, it is highly likely that there will be reform laws and new rules and regulations governing reportorial obligations of corporations to the SEC and their stockholders. Drastic changes in the way accounting firms do business is also a certainty. There will also be increased pressure from stockholders for greater transparency in the conduct of corporate business.
One large conglomerate, Tyco, had been forced to divide itself into four as stockholders grew weary of its complicated accounting reportorial system. It is expected that other corporations with similar complex transactions and accounting reportorial systems will also be obligated to increase transparency or suffer loss of market confidence. Some attention will also be given to such corporate practice as interest free loans to senior executives and other forms of self-dealing.
In a way, problems in corporate governance are as much a concern locally. Our own stock market could be more attractive to local and foreign investors if the fair treatment of minority shareholders could be assured. This is also why the Bangko Sentral issued new rules governing bank directors, if only to make it clear that they have pretty weighty responsibilities.
We are quick to denounce graft and corruption in the public sector but it is just as serious a problem in the private sector. The Board of Directors should be the first line of defense but the composition is often so tilted in favor of the majority stockholders and management. Most boards are rubber stamps.
The SEC, BSP and the appropriate congressional committees should keep a close watch on Enron developments. We need the same safeguards the Americans will adopt in the wake of this business disaster.
Paul Volcker, former Federal Reserve Chairman and head of a committee to probe Arthur Andersen, summed up the importance of being able to rely on the right numbers. "Auditing is crucial to the protection of the investor and to the functioning of efficient markets. If you can’t trust the numbers, how can you allocate capital correctly?"
We strongly support you in having the drug test for drivers immediately stopped (STAR Jan 28/02) for the following reasons:
The testing cannot ferret out drug users. Abstaining from drug use for only two (2) days will yield negative results. A negative test result can also be had for a fee. The driver does not have to really undergo the test but just pay the fee.
The professional competence of "test centers" is questionable. Containers used to sample the urine are not clean and sanitized, thereby putting to question the reliability of the test result. Worse of all, the testing is an added useless cost on the part of all drivers, most of whom do not use drugs.
We also received an e-mail from reader Victor Gil Saldajeno. "I agree with the points you raised regarding the drug tests for individuals securing new licenses or renewing existing ones," Mr. Saldajeno wrote. He suggests that "it will be better if the LTO, LTFRB, PNP, MMDA, and the host of other government agencies responsible for public transportation simply stick to implementing traffic rules and regulations…"
There are more than enough things for them to do to improve traffic flow, the reader points out, from smoke-belching, wayward bus drivers, abusive FX and jeepney drivers and ill-trained traffic law enforcers. "Please continue with the good work, sir... and, like most of those in the silent majority, I cannot help but agree with the points you raised..."
Dr. Norberto Goldie of Parañaque also wrote on the same subject.
"Hi Boo, first of all, let me say that I always enjoy your column, keep up the good work. After reading the piece last Monday on the drug testing requirement of the LTO, I decided to share with you some of my thoughts on the matter.
1. How many free, democratic societies worldwide have this kind of oppressive regulation?
2. Once the scheme has been up and running for a while, would it be unreasonable to expect the LTO to publish, on a regular basis, the number of tests carried out, vis-a-vis the number of positive test results leading to denial of license, so that we can assess for ourselves the effectiveness of this measure?
3. In the event of a positive result, will more sensitive, more specific tests be undertaken to rule out false positives and identify the substance of abuse?
4. In the event of a false positive being established, who would be expected to pick up the tab for the more sophisticated (read very expensive) follow up tests?
5. Are the test results confidential, secure and available only to the agency involved and exclusively for the purpose for which the tests were conducted, or could they come back to haunt the individual applying for a job, police/NBI clearance, passport, visa atbp? How long will results be kept on file?
6. Will an ‘offender’ be required to seek help for their substance abuse, will they face the possibility of prosecution, will the driver’s license be automatically suspended? For how long? Do any of these depend on the substance of abuse?
I think the answers to these and many other questions should be clearly spelled out and made readily available to anyone who is being asked to submit to such mandatory testing.
Teacher: What do you call a person who keeps on talking when people are no longer interested?
Pupil : A teacher.
(Boo Chanco’s e-mail address is bchanco@bayantel.com.ph)