Waiting for a local Enron to blow up

It is amazing how the local accounting and finance communities have remained silent on the implications of the Enron scandal on local accounting and financial reporting standards and practices. It is amazing still how our legislators and bureaucrats, normally alert to publicity opportunities, have similarly been quiet. It seems we are all just waiting with crossed fingers for a local Enron to just blow up.

As it is turning out from US congressional inquiries, the Enron scandal is all about free enterprise and self regulation gone wrong. It is also about accountants betraying the public confidence. Enron has made a re-writing of the rules based on new assumptions that the days of the mechanical bean counters, the human calculators are over.

The accountants we need today must have the ability to realize their tremendous responsibility. They must realize that the lives of people who depend on the accuracy of their reports can be ruined pretty quickly. In time, colleges and universities will revise the way they train future accountants, by going beyond the technical, into the social and ethical aspects of the profession.

In the United States, it is certain that the Enron scandal will spawn reform measures from Congress and the Securities and Exchange Commission. In fact, the head of the US SEC told The Christian Science Monitor that he expects the accounting profession on its own, to take steps to recover public confidence. Arthur Levitt Jr. sees behavior already changing without rules. "Humiliation and embarrassment tend to change behavior faster than rules and legislation. Legislation and rule-making can be effective in prolonging changes in behavior."

But changes mandated by law and by rules promulgated by regulatory bodies are expected for no other reason than politicians and bureaucrats realize that to do nothing is to risk political retribution. For one, executives should expect to face harsher penalties for releasing misleading financial statements. There will also be more stringent rules on what constitutes misleading statements.

They are also talking about new legislation to give the SEC greater authority to suspend or bar unethical executives and directors from serving at publicly listed companies. This must be something similar to the veto power our own Bangko Sentral has over who gets to serve in the boards of local banks as well as who gets appointed as bank officers. It makes sense to expand that rule to cover publicly listed corporations with the SEC exercising that veto power.

Another rule now being contemplated will require publicly listed companies to change auditors every few years. That would at least ensure that a fresh pair of eyes reviewed a company’s finances regularly. That may also have the added benefit of breaking up the market now in the tight grip of just a handful of accounting firms. This is something like the term limits set for politicians holding public office.

Other reform measures include limitations on pension funds being too tied up to the stocks of the company. This is a very debatable issue. Other than in the case of Enron and Global Crossing which both declared bankruptcy, the case of such former blue chips like Lucent and Polariod also come to mind. When their market values suddenly collapsed, so did the hopes and dreams of their long serving employees.

The most important lesson we must learn from Enron is the need for financial statements we can trust. Our investment climate can be enhanced if local and foreign investors know our financial records can be trusted. This is why such organizations as FINEX and PICPA as well as that of our own SEC should speak up on how we can prevent Enronitis from infecting us. FINEX in particular is quick to speak up on matters of national interest in the past. Is this one too close to home?

Given that our big accounting firms are now affiliates of America's big accounting firms, we should hear from them on how they intend to practice their profession in this post Enron environment. We have had many mini Enrons here and it could be a matter of time before something really damaging happens.

But then again, the Filipino way is to do nothing but hope and pray the disaster will not come upon us. It always does.

Bayanihan

Here’s an e-mail we received from a Pinoy who now lives in the San Francisco Bay Area. Ben Simpao thinks Ate Glo should invoke the Bayanihan spirit if she is to succeed.

What can be deduced out of Ate Glo is, at least she’s projecting herself as handling the paddle and guiding the banca at certain points of light. But one thing I noticed is her failure to hammer on the spirit of bayanihan, a Filipino trait that could easily arouse some sense of teamwork or unity that could accomplish goals.

Take a look at her state of the nation speech. Not even a hint was asked from the nation that here is your new president, she needs everyone’s help, please help so she can succeed in solving the country’s problems.

Working as a team worked beautifully for the New England Patriots in winning the Super Bowl in the National Football League. The St. Louis Rams were the odds on favorite, the spread (points plus) settled at 14 points. Yet the underdog Patriots won, the biggest upset in the history of the NFL.

Before kick off time, each team’s offensive and defensive lines are customarily introduced, individually. These are the team’s stars. The offensive line (players) of the Rams jogged one at a time unto the field for the usual adulation. But when the Patriots turn came in, all 53 players sauntered into the field as one.

The business at hand necessitates teamwork. No particular star to shine the spotlight on. That was the theme and philosophy initiated by the head coach. The Patriots won.

The country is awashed with bottom feeders, lawyers and politicians and whiners who would complain about trivial things to promote their own agenda and at the same their own acts of anarchy.

If she could just become earthly by public pronouncements of her major policy decisions, preambled by these words: "Mahal kong kababayan: Ito po ay gagawin ng administrasyon sapagkat ikabubuti nang nakararami sa ating mga kababayan." Then she could explain the cause and effect, how she had arrived at such major decision because the onus and focus is for the good of the public in general.

Now comes the whiners, the placard bearers. Pointblank she could then ask: "Ano ba ang maitutulong ninyo para maayos itong problem?"

So from defensive, she would then be on the offensive while at the same time invoking the spirit of bayanihan. Tulong. Cooperation. Teamwork.

Post-Valentine realities

Marilyn Mana-ay Robles sent these post-Valentine comparisons of love and marriage.

Before –You take my breath away; After – I feel like I’m suffocating

Before – She loves the way I take control of the situation; After – She says I’m a controlling, manipulative egomaniac

Before – Don’t stop! Don’t stop! After – Don’t you start with me!

Before – He’s completely lost without me; After – Why won’t he ever ask for directions?

Before – I only have eyes for you; After – Do you have my "Victoria’s Secret" catalog again?

(Boo Chanco's e-mail address is [email protected])