No laughing matter
Derek Parker finds out about the role of dodgy accounting in corporate collapses.
Indecent disclosure: Gilding the corporate lily
By Frank Clarke and Graeme Dean
Cambridge University Press, $59.95
There are 753,901 jokes about accountants, but this carefully argued book is no laughing matter. Clarke and Dean are both professors of accounting at respected universities, and their previous book, Corporate collapse, had much to say about the ethical standards of modern business. In Indecent disclosure, they drill down even further, to explore the foundation of accounting practices and standards, and their role in the recent string of business disasters.
Clarke and Dean have a good sense of history, as well: they look back at collapses from early last century, noting that each set of scandals led to a new wave of regulation, which in turn became part of the problem as business structures evolved. Everything is remembered but nothing is learned, although there is never a shortage of good intentions.
Clarke and Dean point out that many of the troubling features of cases, from Enron to HIH, were in keeping with the letter of the law and accounting standards. They argue that, in fact, the complexity of accounting standards in-evitably leads to financial statements that are useless at best and misleading at worst. This is not saying that accountants and auditors are inherently corrupt or incompetent, but rather that the mountain of black-letter law does not match, cannot match, the reality of business.
And, of course, wherever there is an area of vagueness, such as the valuation of intangibles, there will be people who, either because of a lack of ethical judgement or because they genuinely believe they are acting in the best interests of their clients, seek to exploit it.
Clarke and Dean argue that the emphasis should be on financial statements that are true and fair, not 'true and fair', as the words are commonly understood. Their sharpest barbs are aimed at corporate groups that are tangles of wholly owned subsidiaries. The underlying aim of such structures, Clarke and Dean believe, is to off-load legal liabilities and confuse the paper trail, and they give plenty of examples to support their case. The answer, they say, is to simply ban wholly owned subsidiaries, forcing a return to more transparent branch / division corporate organisation.
These views are fascinating, but the problem with the GodÂ’s-eye perspective of the book is how to make it work at the practical level. Yes, financial statements should primarily be useful, but useful to whom? Shareholders, regulators, general public? Trying to answer such questions is how complexity developed in the first place. Likewise, moving from the current rules-compliant system to the principles-based system that Clarke and Dean envision would be, to say the least, highly problematic.
However, these difficulties should not undercut the essential value of Indecent disclosure. Senior figures in the business community should be aware of what it has to say. It does not provide all the answers, but it raises the right questions.
Top franchise CEO's secrets revealed
By Darren Stephens
Global Publishing, $29.95
Australia has taken to franchising more than any other country, and some hugely successful networks have been developed. This book features interviews with many of the key figures. Some, like Janine Allis (Boost Juice) are familiar, but the most interesting insights come from lesser-known franchisors like Jason Smith (Backs in Motion) and Michael McCarthy (Barry Plant Real Estate).
They all stress the importance of choosing the right people, when and why to make the jump from branch structure to franchise network, and how to decide the capitalisation structure of the group. Between them, they have probably made every mistake possible, and that provides some important lessons. The book is often a bit too puffy (a great deal about passion and commitment) but it is likely to be useful for anyone considering the route, or advising others on the subject.
We are the new radicals
By Julia Moulden
McGraw-Hill, $34.95
Once retirement was seen as the time to 'give something back'. But this book recounts the stories of a number of executives who decided in mid-career to make a turn into an activity that was less lucrative but more satisfying.
One example is the Adobe marketing executive who set up a web-based network to bring charity organisations and potential donors together.
Another is the high-flier who opted to run a health-orientated non-profit agency rather than aim for a big chair in a top-floor office. Much of the book is taken up with personal accounts, but the last section contains a self-assessment workbook for anyone who is contemplating a radical change of path.
Reference: April 2008, volume 78:03, p. 77
