Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

Corporations ignore public responsibilities

- by Alan Duvall 

Published in Dayton Daily News June 4, 2006 

Guilty verdicts resonated from the Houston courtroom condemning Enron founder Key Lay and former CEO Jeffery Skilling in a corporate fraud and conspiracy case.  Cheers of revenge echoed through homes of shareholders and employees devastated by the financial landmines laid by convicted executives.  

Reflect on the four primary sources of financial pain experienced by ordinary folks in recent times – energy, oil,  healthcare and interest rates. 

Energy:  Enron pioneered innovative market channels of energy distribution.  Success bred greed as the company’s financial architects conjured off-balance sheet companies, transparent except for their ability to divert losses from Enron statements. 

Oil:  Exxon and other oil companies are currently basking in the record profits even as the public labors under the weight of exponentially rising gasoline prices.  Exxon defends its income as consistent with historical industry rates of return - a college professor’s line of defense somehow falling short when measured against the sheer dollars of profits at issue.  By the way: Exxon’s CEO just retired with a retirement package estimated at $400 million. 

Healthcare:  Long-term double-digit increases in health care costs historically blamed on attorneys, research and uncontrollable market forces.  But how about company greed?  The SEC and shareholders are jockeying to sue UnitedHealth Group for backdating key employee stock options purportedly worth $1.6 billion to its CEO alone.  UnitedHealth stock price has plummeted since company announcement of the backdating.   

Interest rates:  Fannie Mae is a government-sponsored enterprise designed to provide reduced interest rate mortgages for low-income borrowers.  Fannie Mae is not the source of the program’s benefits (that’s the government) - nor its intended recipient.  Nevertheless, the SEC has just levied a $400 million fine on the company for fraudulent preparation of financial statements allegedly responsible for maximizing key employee bonuses for the years in question.   

All of these companies hastily construct an imaginary wall between internal excesses and their impact on the exploding prices of services rendered to the public at large, as well as declining dividends to shareholding owners.  But excesses herein outlined are most certainly mere tips of the iceberg and likely reflect systemic cultures of abuse.  

Unfortunately, corporate executives have become disconnected from the common person and desperately need sensitivity training from Dr. Phil.

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.