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Home > Blog > Gentlemen, Start Your Shredders
Out of Our Minds
Friday, June 03, 2005 2:32 PM
Gentlemen, Start Your Shredders
Kevin Salwen on Ethics

The conviction and death sentence of accounting firm Arthur Andersen probably has more interesting twists and turns than just about any of the recent corporate whodunnits. Tyco? Just an overcompensated egomaniac CEO feeding at the trough. WorldCom? Mostly a case of trying to keep up with someone else's expectations (who among us doesn't have that problem sometimes?) -- in this case, Wall Street.

But the Andersen case, overturned this week by the U.S. Supreme Court in a remarkably short 6 weeks, offers a glimpse into a multitude of fascinating ethical arenas. The most obvious, of course, is that Andersen wasn't really the player; it was the watchdog (supposedly, anyway). It was the company that was supposed be protecting us, the shareholders and public, from the likes of them -- in this case the leaders of Enron.

Beyond that, though, is the debate over shredding of documents. Andersen's 'document retention policy' came into play when partners in charge of the Enron audit decided to remind employees of the policy to shred documents as regulators began breathing closer to the necks of those who would be accused. In overturning the lower court conviction, Chief Justice William Rehnquist said this week that, 'It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy.'

Into the debate steps The New York Times' Floyd Norris, one of the best thinkers in business journalism today. His piece, in the Friday paper, takes us through the heart of that document retention policy, noting among other things that it was written by an Andersen partner who was himself under investigation for his role in an accounting fraud at Waste Management.

As Norris points out in his piece, the problem at Andersen and at other accounting firms is that keeping the customer happy runs directly into the problem of uncovering fraud, blowing the whistle, etc. Could it be that the system is just flat-out broken? Could it be that the auditing methods need to be housed elsewhere, not in companies attempting to jockey for the business?


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