Listen to this article
By C. Bruce Jones, Major –
Territorial Finance Secretary
“I refuse to answer based on grounds that what I might say may incriminate me. I plead the 5th amendment.” If you witnessed much of the Senate hearings focused on the fraudulent activity that has brought down Enron, WorldCom, and Arthur Andersen, you would have heard a number of current and former executives of these firms pathetically “pleading the 5th.” We watched and observed this for what it really is – an outrageous lack of moral character. As further accounting and other management failures are exposed in the coming days we will become further disillusioned with the credibility of those who have been entrusted with much of the capital wealth in Western society.
The fraudulent conduct of the senior executives of these representative companies has done considerable damage to the financial strength of America. Some of the damage includes: the virtual bankruptcy of some of the world’s largest companies; loss of thousands of jobs; loss of retirement and savings of employees and investors, and loss of credibility of America’s capital and financial systems. A few senior executives, exercising serious character flaws in the form of greed, deception, manipulation, and pride, have used illegal and unethical accounting methods to perpetrate fraud at the highest level with extraordinary damage to millions who trusted these managers, the system, and the public accounting profession.
Uncompromising stewardship
As an organization The Salvation Army must demonstrate through uncompromising stewardship that we are credible, and worthy of the trust, not only of our donors, but also with all who come within our influence. We will be careful to justify the trust of those who provide resources for our ministry. We will continue to publish fair, meaningful, informative, and materially accurate financial statements that adequately inform the reader of the Army’s fiscal performance and condition. We will use reputable public accounting firms who are clearly independent in form and substance, and will not be compromised by conflicts of interest.
Individually we must conduct ourselves with highest ethical standards. This relates to our secular interests as well as our religious and organizational activities. The world is watching. We have a marvelous opportunity to demonstrate that character does count, and that God will honor the application of Christian based principles in our business and personal pursuits. I trust American business will return to those Christian based principles as well. I believe God will honor those efforts, and that once again stock and bond values will be actually that, values (prices) based on earned income, properly measured with reliable accounting rules and audited with integrity.
Character counts
Many of us listen to the syndicated radio advisor, Michael Josephson. His weekly commentary speaks to the importance of living a life to ethical standards, and he generally addresses a specific contemporary issue in his comments. His analysis is often profound and points out real deficiencies in ethical conduct of business and other aspects of daily life. He ends his commentary with the phrase, “…I’m Michael Josephson reminding you that character counts.”
In addition to the failures of the executives of Enron, et al., in a time when character should count, we have also been betrayed by the public accounting world. Exemplified by the conduct of the senior partner auditing Enron for Arthur Andersen, many have been caught up in the pursuit of inappropriate consulting fees at the expense of required independence. Andersen’s lead auditor, David Duncan, violated the ethics code of the accounting profession, lied to the Board of Enron, and endorsed fraudulently prepared financial statements, often referred to as “cooking the books.”
For those of us who are having difficulty understanding the meaning of the Enron, WorldCom issues, maybe the following anecdote will provide some simple, but yet profound enlightenment.
An old country farmer with serious financial problems bought a mule from another old farmer for $100, who agreed to deliver the mule the next day. However, the next day the selling farmer drove up and said, “Sorry, but I have some bad news, the mule died.”
“Well, then, just give me my money back”.
“Can’t do that. I went and spent it already”
“OK, then, just unload the mule.”
“What ya gonna do with a dead mule?”
“I’m going to raffle him off.”
“You can’t raffle off a dead mule!”
“Sure I can. I just won’t tell anybody he’s dead.”
A month later the two met up and the farmer who sold the mule asked,
“Whatever happened with that dead mule?”
“I raffled him off just like I said I would. I sold 500 tickets at $2 each and made a profit of $898.”
“Didn’t anyone complain?”
“Just the guy who won. So I gave him his $2 back.”
To thousands of investors, employees, and others through out the world, the accounting deceptions of Enron, WorldCom, and many others are reflective of that raffled dead mule. Josephson says that the character issues exemplified by the farmer, David Duncan, and corporate executives also permeate much of western society. Joseph-son attributes much of the contemporary “cook the books” mind set to the change in accounting ethics (note: the rules haven’t changed). “It became a bottomline mentality, that whatever works is all right.” In so many challenges of life with so many of us, the answer becomes, “whatever works is right.”
To “cook” or not to “cook”?
As Chief Financial Officer for a private advertising company, I was directed by the president of the company to “cook the books.” The “cooking” demanded by my president is exactly the “cooking” WorldCom practiced in “hiding” the $3.9 billion in expense. The intent is to deceive stockholders and investors into investing in, lending to, or providing other capital to the company. Refusing to “cook the books” became the basis for my termination. The president did find another CFO to “cook.” The result was acute financial indigestion, and ultimately the company failed. You see, character does count.
Without a lasting foundation of character throughout our society, we will count many versions and editions of the Enrons of the world. Today’s foundation for character is the same as the one Paul espoused to Timothy, and the one my grandfather inscribed in my first Bible, “Work hard so God can say to you, ‘Well done’.” Be a good workman, one who does not need to be ashamed when God examines your work.” The quote from Timothy 2:15 provides the simple, yet profound foundation for successful living: true successful secular and Christian living must be founded in the constant and consistent application of integrity in our daily walk and work. The pursuit of unearned wealth or other desires of the heart and flesh through the metaphorical “cooking of the books” will not be honored by God or by society demanding integrity in its leaders in all aspects of life.
Character and credibility
I have a close friend and colleague who is a senior audit manager with Arthur Andersen. GJ is a man of character, honor and integrity, and not involved with the Enron scandal. GJ will surely lose his job as Andersen goes out of business. I grieve over the impact the Enron scandal has had on my friend, and what will be a difficult transition in his life. However, my grief will be overcome, because Josephson is right. Character does count. GJ will transcend the failure of men and institutions because he has founded his life in the character, compassion, and love of Jesus Christ. God does recognize, honor, and reward those who blend the character building ingredients of honor and integrity Paul recommended to Timothy. Those who do likewise will be ultimately blessed with the manna of heaven. Those who “cook the books” will not end up…in the “BOOK.”
As Salvationists, Christians, and Americans we need to understand the moral, ethical, and business implications of the tragedy infecting a significant and highly visible area of American society. We should not be disillusioned relative to the motivation for the extraordinary misdeeds of the corporate entities or the few culpable auditors at Arthur Andersen. The real issues are greed, pursuit of unearned wealth, and the usual related moral failures. At the soul of the issue is character and credibility. The fallout from these blatant character failures, has, and will affect us in many ways: financially, culturally, and politically. It will impact us personally, organizationally, and nationally. How we personally and as a society respond will redefine a new paradigm in ethical and moral behavior for generations. Character does count.