Ceo Avoidance

Today as always, most CEOs rely on their financial advisors to know the details, to interpret the indicators, and to keep them informed. In many cases CEOs simply don’t know enough about the financial underpinnings of their own companies. Often they are challenged by an inability to effectively read between the lines of their own financial reports. As a result, they live with an awesome potential liability. Yet, despite the risk, many CEOs do not want to freely acknowledge their financial shortcomings to their staff, their boards, not even to their CFOs. Or maybe especially to their boards and CFOs. This risky scenario is being played out in corporations large and small across the country. Samuel Waksal has gone to jail, Martha Stewart has been indicted, and several of the smaller fry in the Enron case have copped pleas. But the corporate scandals' big fish; Enron's Jeffrey Skilling, WorldCom's Bernard Ebbers, Tyco's Dennis Kozlowski, swam free and enjoyed their millions in ill-gotten gains while working on their appeals. By the way, if you felt sorry for Arthur Andersen after his conviction for obstruction of justice in the Enron case, then perhaps you believed the protests that it knew nothing of WorldCom's egregious accounting fraud, even though it audited that company's books, too. The WorldCom debacle completely overshadowed another development which is Xerox's admission that it improperly accelerated revenues to the tune of $1.9 billion. After brazenly defying the SEC, Xerox finally admitted that it had misstated revenue by $3 billion, a figure that turned out to be far too low. If there's any silver lining in this national crisis of executive integrity and investor confidence, it's that the corrupt are being winnowed out. I was surprised to see at that time that AT&T and Sprint shares dropped on the WorldCom news, since a WorldCom bankruptcy could actually benefit them by eliminating a major competitor. WorldCom has been a major reason the industry has been suffering from such cut-throat price competition. From the telecom industry's point of view (if not consumers'), the best solution would be a sale of WorldCom assets and the end of WorldCom as a stand-alone competitor. The telecom industry desperately needs consolidation. Still, opinions abound about the case even among those not paying close attention. Mr. Ebbers, 63, is a charismatic 6-foot-4 native of Canada who put down deep roots in the 1960's to play basketball at Mississippi College, a Baptist college in nearby Clinton. A high school coach and hotel operator before becoming a telecommunications entrepreneur, Mr. Ebbers's story is so widely known there that it is easy to come by people who have already decided how it should end. Some say, but only on condition of anonymity, that Mr. Ebbers has "destroyed the lives" of people who trusted him and that the maximum jail time of 85 years and financial penalties, including fines and restitution orders, that he faces are far too kind. But many say they are convinced that the mastermind of the fraud was Scott D. Sullivan, WorldCom's former chief financial officer, who has pleaded guilty to charges in the case and is expected to be the government's major witness against Mr. Ebbers. In addition, Mr. Ebbers, who had been highly visible during WorldCom's growth years, was surprisingly and ever so increasingly reclusive during his trial. He stopped going to the local barber shop, and quit sitting down in the dining area of the Shell station near his home to eat the fried chicken he often picked up on the way home from church, according to several local residents. Brookhaven residents also said that he had stopped teaching Sunday school at the Easthaven Baptist Church, often referred to as "the church Bernie built" because of donations locally reported to be close to $1 million. A church official said that none of the staff would comment. Even before the trial, WorldCom had faded as a topic of conversation with the passing of fears that its woes might deal a harsh economic blow, not just to individuals who lost investments, jobs or pensions, but to the entire region. Michael D. Capellas, who became chairman and chief executive in late 2002, renamed the company MCI after its largest subsidiary and moved its headquarters to Ashburn, Va. But employment in Brookhaven and at the suburban campus in nearby Clinton that had been WorldCom's headquarters since 1998 appears to have stabilized at about 850. The new employment levels leave the three-building Clinton campus roughly two-thirds empty and represent the loss of more than 2,100 jobs from the company's peak employment in the region at the beginning of 2001. In the meantime, other companies expanded. Nissan, which opened an auto assembly plant just north of Brookhaven in Canton in 2003, employed 4,200 workers and an additional 1,900 contractors, according to the Mississippi Development Authority. Rosemary Aultman, mayor of Clinton, at this time, conceded that the town suffered a blow to local pride in losing its status as home to a Fortune 500 company - the only one in Mississippi. But the official move of what is now MCI to suburban Washington has not halted the steady rise in Clinton's population, or in its tax receipts. The decline in the personal fortune of Mr. Ebbers has already been felt in some quarters. The local hockey team, the Jackson Bandits, in which Mr. Ebbers shared majority control with J. L. Holloway, a local businessman, folded in 2003. Some beneficiaries of his largess decline to associate with him. Mississippi College, for